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ECONOMICS 

A  Text  Book 

FOR  THE   USE   OF 

HIGH  SCHOOLS,  COLLEGES 
AND  UNIVERSITIES 

WRITTEN  BY 

W.  S.  SMITH,  C.  E. 

A  Graduate  of  Wyoming  Seminary,  Kingston,  Pennsylvania 
A  Graduate  of  Lehigh  University 

Author  of 

CAPITAL  AND  LABOR,    THE  STORY  OF 

CIVILIZATION,    THE  DON  QUIXOTE 

OF  THE  TWENTIETH  CENTURY 


BOSTON 

THE  ROXBURGH  PUBLISHING  COMPANY 

INC. 


.1 


Copyrighted  1918 

By  W.  S.  Smith,  C.  E. 

Rights  Reserved 


•  •  •  •  • .  • 

•  •   •  •,  •  • 


•  •  •   •  • 


• .  •  •  • 

•  •     • 

•  •  • . 


CONTENTS 


PART   ONE 

Natural  Ck)NDiTiON8 
Chap.  Page 

Introduction 

I    Natural  Laws   11 

II    Economic  Laws    27 

III  Production    35 

IV  Distribution    45 

V    Consumption    53 

VI    Compensation    61 

VII    Valuation    68 

PART  TWO 

Engineering  Conditions 

VIII    Investments  in  Natural  Products 75 

IX    Interest  in  Commercial  Products 86 

X    Financial  Investments 94 

XI    Intellectual  Investments  109 

PART    THREE 

Social  Conditions 

XII    Governments;      Their      Origin      and 

Functions    119 

XIII  Taxation    134 

XIV  Wage  Earners  154 

XV    Insurance    172 

XVI    Scientific  Management  181 

XVII    Panics,  Strikes  and  Wars 194 

XVIII    Conclusion    210 


INTRODUCTION 


The  old  adage  was : — "That  man  is  the 
architect  of  his  own  fortune."  Today,  hu- 
manity is  dragged  down  by  unseen  and  in 
many  cases,  unknown  forces.  The  object  of 
this  book  is  to  discuss  these  forces  so  that 
people  may  have  a  better  understanding  of 
the  conditions  that  surround  them,  in  their 
every  day  life. 

The  Author  W.  S.  S. 


PART  I. 

Natural  Conditions 


CHAPTER  ONE. 
Natural  Laws. 

Definition : — Economics  is  the  condition  of 
procuring  the  greatest  returns  with  the  least 
expenditure  of  time,  energy,  material  or 
finance. 

The  world  can  be  divided  into  three  great 
divisions  or  fields.  First,  the  division  or  field 
where  nature  is  all  powerful.  Second,  the 
division  or  field  where  man  and  nature  works 
together.  Third,  the  division  or  field  where 
man  works  independently  of  nature.  A  sim- 
ple illustration  of  the  division  where  nature  is 
all  powerful  is  the  weather.  Humanity  is 
constantly  affected  more  or  less  by  the 
weather,  yet  no  person  can  control  the 
weather.  A  simple  illustration  of  the  division 
or  field  where  humanity  and  nature  work  to- 
ll 


*      •    •      •      «  > 

,  •   •  •••••• •      • 


•    •  • 
.  ...      -  -       -   - 


>•••'.  •,< 


Economics 

gether  is  the  steam  engine.  Humanity  makes 
the  engine  and  nature  furnishes  the  force  to 
drive  the  engine.  A  simple  illustration  of  the 
division  or  field  where  humanity  works  inde- 
pendently of  nature  is  governments  or  war. 
Humanity  may  have  strong  or  weak  govern- 
ments; much  government  or  no  government. 
The  people,  in  one  part  of  the  world,  may  try 
to  kill  the  people  in  another  part  of  the  world 
by  calling  it  war,  or  all  the  people  may  live 
together  in  harmony.  From  observation  we 
see  that  nature  makes  no  interference  in  these 
workings  of  humanity. 

In  our  present  study  we  will  consider  the 
natural  conditions  over  which  humanity  has 
no  control,  as  Natural  Conditions;  the  condi- 
tions where  man  and  nature  work  together  as 
engineering  conditions;  the  condition  where 
man,  and  not  nature,  controls  as  sociological 

12 


Economics 

conditions.  Since  Economics  is  to  treat  of 
the  natural  conditions,  the  first  step  will  be 
the  study  of  natural  conditions.  In  this  study 
of  natural  conditions  we  will  bring  to  our  aid 
the  use  of  mathematics.  First  we  will  use 
Geometry. 

Taking  a  plane  surface.  Beginning  with  a 
point  and  expanding  symmetrically  over  a 
surface  gives  the  circle.  The  area  of  this  fig- 
ure is  determined  with  one  dimension,  the 
radius  or  its  double,  the  diameter,  together 
with  a  constant.  Pass  two  lines  through  the 
point  and  complete  the  figure  with  parallel 
lines  gives  the  square  or  parallelogram.  The 
area  of  this  figure  is  determined  by  using  two 
dimensions,  the  length  and  the  breadth.  Con- 
necting two  adjacent  sides  of  the  square  or 
parallelogram  with  a  third  side  gives  the  tri- 
angle.   The  area  of  this  figure  is  determined 

13 


Economics 

by  using  the  base  and  half  the  altitude.  The 
altitude  of  a  triangle  is  determined  by  calling 
a  portion  of  the  base  M.  the  leg  of  the  tri- 
angle R.  and  the  hypothenuse  of  the  triangle 
A.  This  gives  the  equation  A^ — R2=:M^,. 
thus  using  three  dimensions.  The  triangle 
reduces  to  a  polygon.  The  area  of  this  figure 
is  determined  by  using  the  perimeter  of  the 
base  and  one-half  the  radius  of  the  inscribed 
circle.  Using  the  method  explained  for  de- 
termining the  altitude  of  the  triangle,  to  de- 
termine the  radius  of  the  inscribed  circle,  and 
combining  these  three  dimensions  with  the 
perimeter,  gives  the  four  dimensions  neces- 
sary to  calculate  the  area  of  the  polygon. 
Likewise  the  polygon  can  be  developed  di- 
rectly from  the  square  or  parallelogram.  In- 
creasing the  number  of  sides  of  the  polygon 
indefinitely,  the  limit  is  the  circumference  of 

14 


Economics 

a  circle.  Decreasing  the  radius  and  perimeter 
of  the  circle  to  its  limit  gives  a  point,  thus 
completing  the  cycle. 

Taking  the  solids.  Take  a  point  and  expand 
symmetrically  in  every  direction  gives  the 
sphere.  The  volume  of  this  solid  is  deter- 
mined by  one  dimension,  the  radius  or  its 
double,  the  diameter,  together  with  a  constant. 
By  truncating  the  sphere  a  cylinder  may  be 
formed.  The  volume  of  this  solid  is  deter- 
mined by  two  dimensions,  the  radius,  or  its 
double,  the  diameter,  times  the  altitude 
together  with  a  constant.  Pass  four  parallel 
intersecting  planes  through  the  cylinder 
gives  the  cube  or  parallelepiped.  The 
volume  of  this  solid  is  determined  by  using 
the  three  dimensions,  length,  breadth  and  alti- 
tude. Connecting  two  adjacent  planes  of  the 
cube  or  parallelopiped  with  a  third  plane  gives 

15 


Economics 

the  prism.  The  volume  of  this  solid  is  the  area 
of  the  base  times  the  altitude.  As  previously 
explained  the  base  being  a  triangle  requires 
three  dimensions  to  determine  its  area.  Com- 
bining these  three  dimensions  with  the  altitude 
gives  four  dimensions.  The  prism  can  be 
reduced  to  a  triangular  pyramid.  The  volume 
of  this  solid  is  the  area  of  the  base  times  one 
third  the  altitude.  This  solid  has  six  dimen- 
sions, both  the  altitude  of  the  pyramid  and 
the  altitude  of  the  base  forming  separate  tri- 
angles. The  triangular  pyramid  reduces  to  a 
pyramid  with  a  polyagonal  base.  But,  this  in 
turn  has  but  six  dimensions  as  the  radius  of 
the  inscribed  circle  occurs  in  the  polygon  and 
again  in  the  altitude.  The  cube  or  parallel- 
opiped  can  be  changed  directly  into  a  pyramid 
with  a  rectangular  base.  To  determine  the 
volume  of  this  solid  requires  five  dimensions. 

16 


Economics 

Two  dimensions  to  determine  the  area  of  the 
base  and  three  dimensions  to  determine  the 
altitude.  A  pyramid  with  a  rectangular  base 
changes  readily  into  a  pyramid  with  a  polya- 
gonal  base.  This  solid  has  six  dimensions  as 
previously  explained.  A  pyramid  with  a  poly- 
agonal  base  reduces  readily  to  a  cone,  a  solid 
with  three  dimensions.  The  radius  or  diam- 
eter of  the  base,  the  altitude  and  the  slant 
height.  By  truncating  the  cone,  a  cylinder 
may  be  produced.  The  volume  of  this  solid 
is  formed  by  using  two  dimensions  as  previ- 
ously explained.  The  cylinder  reduces  to  a 
sphere,  or  solid  of  but  one  dimension.  Re- 
ducing the  radius  and  surface  of  a  sphere  to 
its  limit  gives  a  point,  thus  completing  the 
cycle. 

If  followed  through  the  triangle,  the  law 
shows   the   plane   figures   increasing  continu- 

17 


Economics 

ally  from  a  figure,  the  circle,  having  but  one 
dimension,  to  a  figure,  the  polygon,  having 
four  dimensions.  If  the  law  is  followed 
directly  through  the  square  or  parallelogram 
to  the  polygon,  no  figure  is  produced  having 
three  dimensions. 

In  the  solids,  the  law  follows  continuously 
to  the  prism,  a  solid  having  four  dimensions. 
If  the  prism  is  changed  to  a  triangular  pyra- 
mid, and  the  triangular  pyramid  is  changed 
to  a  polyagonal  pyramid,  no  solid  is  produced 
having  five  dimensions,  but  two  solids  are 
produced  having  six  dimensions.  If  the  cube 
or  parallelopiped  is  reduced  to  a  pyramid,  no 
solid  is  produced  having  four  dimensions. 
The  law  passes  from  a  solid  of  three  dimen- 
sions to  a  solid  of  five  dimensions  and  then  to 
a  solid  of  six  dimensions.  After  reaching  a. 
solid  of  six  dimensions,  the  polyagonal  pyra- 

18 


Economics 

mids,  the  law  drops  directly  to  a  solid,  the 
cone,  having  but  three  dimensions.  The  law 
then  reduces  directly  through  the  cylinder,  a 
solid  with  two  dimensions,  to  a  sphere,  a  solid 
with  but  one  dimension. 

Thus  with  the  aid  of  mathematics,  we  see 
that  the  laws  of  nature  do  not  develop  uni- 
formly in  all  cases.  Call  each  ^dimension  a 
function.  In  both  the  plane  and  solid  figures, 
the  law  branches  and  reaches  the  same  limit 
by  two  routes.  After  passing  its  limit,  both 
the  plane  and  solid  figures  lose  three  func- 
tions. While  we  may  not  be  able  to  locate 
just  where  the  change,  takes  place,  at  some 
point  the  polygon  ceases  to  be  a  polygon  and 
becomes  a  circle.  In  the  same  manner  the 
pyramid  ceases  to  be  a  pyramid  and  becomes 
a  cone.  Whenever  that  change  takes  place, 
the  figures  cease  to  exist  in  their  former  state. 

19 


Economics 

As  we  proceed  with  our  study,  we  will  find 
other  laws  of  nature  that  are  affected  in  a 
similar  manner. 

Different  Natural  Laws. 

Plants  remain  permanently  in  one  place 
during  the  term  of  their  natural  lives  while 
animals  roam  from  place  to  place.  Hence, 
the  vegetable  kingdom  affords  the  better 
opportunities  for  the  study  of  natural  laws. 
In  the  vegetable  kingdom  any  person  can 
easily  observe  three  conditions.  First,  the 
condition  where  the  seed  matures,  but  the 
stem  dies  and  the  root  dies.  This  condition 
is  readily  seen  by  observing  the  grains,  wheat, 
rye,  corn,  etc.  Second,  the  condition  where 
the  seed  matures,  the  stem  dies,  but  the  root 
lives.    This  condition  is  readily  seen  by  observ- 

20 


Economics 

ing  the  grasses,  clover,  timothy,  blue  grass, 
etc.  Third,  the  condition  where  the  seed  ma- 
tures, but  the  stem  lives  and  the  root  lives. 
This  condition  is  readily  seen  by  observing 
the  trees,  oak,  chestnut,  beech,  hickory,  etc. 
As  yet  we  are  unable  to  prove  why  a  grain 
of  wheat  will  not  grow  into  an  oak  tree  or 
why  an  acorn  will  not  grow  into  a  stalk  of 
wheat.  At  the  present  time  we  are  compelled 
to  accept  these  facts  as  axioms.  The  facts 
show  conclusively  that  the  laws  of  nature  are 
different.  That  is,  the  results  of  nature,  that 
we  see  around  us,  are  produced  by  the  work- 
ings of  different  natural  laws.  Hence,  we 
would  not  be  justified  in  trying  to  harmonize 
all  natural  phenomenon  as  being  produced  by 
one  great  natural  law. 


21 


Economics 
Varying  Natural  Laws. 

We  may  see  men  laying  one  brick '  upon 
another  brick,  thus  producing  a  wall.  Or 
reversing  the  process,  taking  away  brick  after 
brick  will  destroy  the  wall.  Another  condi- 
tion, not  so  easily  observed,  is  the  placing  of 
one  force  against  another  force  to  produce  the 
balance.  A  fine  illustration  of  this  principle 
is  the  working  of  a  pair  of  scales. 

These  three  observations  give  us  the  three 
great  principles  of  mathematics,  namely, 
building  up;  tearing  down;  and  the  balance. 
Building  up  is  represented  by  addition  and 
multiplication.  Tearing  down  is  represented 
by  subtraction  and  divison;  the  balance  being 
represented  by  the  equation  in  Algebra.  In 
ordinary  business  transactions,  quantities  are 
considered  as  fixed.    The  grocer's  pound,  the 

22 


Economics 

steelman's  ton  and  the  engineer's  foot,  are  all 
definite  fixed  quantities.  Let  us  consider  a 
railroad  train  as  passing  from  a  point  A.  to  a 
point  B.  The  distance  from  A.  to  B.  remains 
constant,  but  while  the  train  is  in  motion,  the 
distance  of  the  train  from  either  A  or  B  is 
constantly  varying. 

Quite  recently  mathematicians  have  discov- 
ered that  there  are  two  kinds  of  varying  quan- 
tities. The  sides  of  a  triangle  vary  but  the 
ratio  of  variation  is  constant.  This  gives  us 
the  tables  of  Trignometric  functions  used  by 
engineers  and  architects.  The  second  kind  of 
varying  quantities  seem  to  be  more  perplex- 
ing and  more  difficult  to  comprehend ;  that,  in 
which  the  quantities  vary  and  the  ratio  varies. 
So  difficult  to  comprehend  and  so  perplexing 
are  the  workings  of  this  varying  quantity, 
that  for  the  present,  we  will  content  ourselves 

23 


Economics 

by  merely  proving  that  such  a  condition  really 
exists.  As  an  illustration  of  this  varying  con- 
dition we  w^ill  consider  a  young  lady,  aged 
twenty,  who  contemplates  marrying  a  man 
:aged  forty.  The  young  lady  demurs  and  a 
sympathetic  friend  takes  her  to  task.  The 
young  lady  says,  "To  tell  the  truth  he  is  too 
old."  "But,"  says  the  friend,  "he  is  only 
twice  as  old  as  you  are."  "That,"  says  the 
young  lady,  "Is  just  what  is  worrying  me,  for 
when  I  am  forty  he  will  be  eighty."  A  mo- 
ment's consideration  will  show  us  the  fallacy 
of  the  young  lady's  arithmetic. 

For  the  sake  of  argument,  let  us  consider 
that  they  marry.  When  the  wife  is  one  sec- 
ond old  the  ratio  of  their  ages  is  one  to 
631,065,600.  When  the  wife  is  one  hour  old 
the  ratio  of  their  ages  is  one  to  175,296.  When 
the  wife  is  one  day  old,  the  ratio  of  their  ages 

24 


Economics 

is  one  to  7304.  When  the  wife  is  one  year 
old,  the  husband  is  twenty-one  years  old  and 
the  ratio  of  their  ages  is  one  to  twenty-one. 
When  the  wife  is  five  years  old,  the  husband 
is  twenty-five  years  old  and  the  ratio  of  their 
ages  is  one  to  five.  When  the  wi^e  is  ten 
years  old,  the  husband  is  thirty  years  old  and 
the  ratio  of  their  ages  is  one  to  three.  When 
the  wife  is  twenty  years  old  the  husband  is 
forty  years  old  and  the  ratio  of  their  ages  is 
one  to  two. 

By  increasing  their  ages  indefinitely,  the 
ratio  between  their  ages  can  be  made  less  than 
any  assigned  quantity,  however  small,  but  the 
ratio  can  never  become  zero,  since  the  differ- 
ence in  their  ages  is  always  twenty  years. 
This  condition  gives  us  an  idea  of  the  differ- 
ential of  calculus. 

From  what  has  preceded  we  are  able  to 

25 


Economics 

draw  three  conclusions.  First,  the  laws  of 
nature  branch  and  may  overlap  each  other. 
Second,  the  laws  of  nature  are  different. 
Third,  the  laws  of  nature  vary. 


26 


Economics 


CHAPTER  11. 
Economic  Laws. 

In  order  to  supply  the  various  needs  of  the 
human  race,  supplies  are  drawn  from  the 
mineral,  the  animal  and  the  vegetable  king- 
doms. In  many  cases,  the  conditions  are  so 
closely  interwoven  that  it  is  a  difficult  task  to 
distinguish  where  one  condition  ends  and  an- 
other condition  begins.  In  its  broader  sense 
all  operations  will  come  under  either  one  of 
three  general  divisions.  Either,  the  material 
is  used  as  nature  produces  it.  One  kind  of 
material  is  transformed  into  another  kind  of 
material,  or,  certain  kinds  of  material  are 
used  to  produce  certain  other  kinds  of  ma- 
terial. 

27 


Economics 

First,  the  material  is  used  just  as  nature 
furnishes  it.  Under  this  condition  we  are 
only  allowed  to  use  the  amount  of  material 
that  nature  furnishes.  In  the  case  of  miner- 
als, we  may  mine  and  use  them  until  the  sup- 
ply is  exhausted.  After  the  supply  is  ex- 
hausted all  mining  operations  and  likewise 
all  using  operations  must  cease.  The  same 
conditions  apply  to  any  article  that  we  may 
possess  whether  it  be  food  supplies,  building 
material,  finances  or  any  other  article.  We 
can  only  use  of  that  article  until  the  supply 
is  exhausted.  This  condition  gives  us  our 
first  Economic  Law  which  we  will  designate 
as  the  Economic  Law  of  Material  or  the  Eco- 
nomic Law  of  Decreasing  Returns. 

In  the  second  condition,  we  may  possess  an 
article  and  wish  to  transform  that  article  into 
some  other  article.     As  an  illustration,   the 

28 


Economics 

farmer  may  have  grain  and  hay  which  he 
transforms  into  pork,  beef  or  mutton.  The 
mechanic  may  transform  coal  into  steam  or 
transform  a  water  fall  into  electricity.  The 
financier  may  transform  money  into  roads, 
cities,  factories,  etc.  This  condition  gives  us 
our  second  Economic  Law,  which  we  will 
designate  as  The  Economic  Law  of  Transfor- 
mation or  the  Economic  Law  of  Constant 
Returns. 

In  the  third  condition,  we  may  desire  arti- 
cles that  nature  will  not  produce  unless  as- 
sisted by  man.  We  desire  grain  for  food  and 
in  order  to  procure  grain  man  must  prepare 
the  soil  and  sow  the  seed.  We  desire  steel  for 
building  material  and  in  order  to  procure  steel 
man  must  place  together,  in  a  heated  furnace, 
iron  ore,  coal  or  coke,  limestone,  etc.  This 
condition  gives  us  our  third  Economic  Law 

29 


Economics 

which  we  will  designate  as  the  Economic  Law 
of  Production  or  the  Economic  Law  of  In- 
creasing Returns. 

In  our  every  day  lives,  we  see  some  people 
constantly  engaged  in  tilling  the  soil;  other 
people  constantly  engaged  in  building  opera- 
tions; other  people  constantly  engaged  in  fi- 
nancial operations ;  and  still  other  people  con- 
stantly engaged  in  intellectual  work.  If  we  try 
to  harmonize  these  various  conditions  into  one 
great  natural  law,  we  simply  end  in  confusion. 

Probably  the  one  condition  that  has  puzzled 
economists  of  the  past,  more  than  anything 
else,  is  the  fact  that  in  economics  two  sets  of 
natural  laws  cross  each  other  at  right  angles. 
One  set  of  laws  splits  into  four  branches  which 
we  will  designate  as  Natural,  Commercial,  Fi- 
nancial and  Intellectual.  These  four  branches 
are  crossed  at  right  angles  by  three  Economic 

30 


Economics 

Laws.  The  Law  of  Material  or  the  Law  of 
Decreasing  Returns ;  the  Law  of  Transforma- 
tion or  the  Law  of  Constant  Returns ;  and  the 
Law  of  Production  or  the  Law  of  Increasing 
Returns. 

To  compHcate  matters  still  more  the  laws 
overlap  in  the  professions.  A  successful 
farmer  must  be  a  fairly  good  doctor  because 
he  is  constantly  called  upon  to  care  for  the 
very  young  and  give  first  aid  to  the  injured. 
A  successful  doctor  must  be  an  expert  farmer 
because  he  is  constantly  called  upon  to  pre- 
scribe special  foods  for  his  patients  and  he 
must  know  whether  or  not  his  patients  are 
getting  the  food  he  prescribes.  An  engineer 
must  be  a  good  financier.  He  must  not  only 
be  able  to  design  and  superintend  the  erection 
of  difficult  engineering  structures  but  he  must 
know,    in    advance,    about   how   much   these 

31 


Economics 

structures  will  cost  and  about  how  much  they 
will  earn  when  the  project  is  put  in  operation. 
A  financier  must  be  a  good  engineer  to  know 
whether  or  not  it  is  safe  to  invest  in  certain 
projects.  Lawyers  and  ministers  are  brought 
into  contact  with  all  phases  of  life  and  busi- 
ness. In  many  cases  a  business  will  overlap. 
That  is,  some  transactions  will  occur  in  one 
economic  section  while  other  transactions  will 
occur  in  a  different  economic  section.  In 
order  to  properly  classify  a  business  transac- 
tion, economically,  it  is  necessary  to  consider 
the  element  of  time. 

In  the  Economic  Law  of  Material  or  the 
Economic  Law  of  Decreasing  Returns,  the 
element  of  time  has  no  effect  upon  the  trans- 
action. Johnnie  may  eat  all  his  cake  today,  or, 
he  may  save  part  of  it  until  tomorow.  As  far 
as  natural  laws  are  concerned  a  person  may 

32 


Economics 

hunt  or  fish  at  any  time.  As  far  as  the  ditch 
is  concerned,  a  laborer  may  dig  it  today,  to- 
morrow, next  day  or  next  year.  As  far  as  the 
letter  is  concerned  it  may  be  written  in  the 
forenoon  or  the  afternoon.  The  letter  can  be 
advanced  or  delayed  to  conform  to  the  desires 
of  the  writer.  In  any  of  these  transactions  the 
element  of  time  does  not  affect  the  final  result 
or  the  finished  product. 

In  the  second  Economic  Law,  the  Law  of 
Transformation  or  the  Law  of  Constant  Re- 
turns, the  element  of  time  is  either  periodical 
or  intermittent.  The  stock-raiser  collects  the 
products  of  his  flocks  and  herds  at  certain 
periods  of  the  day  or  certain  seasons  of  the 
year.  The  machine  runner  either  runs  his 
machine  according  to  a  schedule  or  for  certain 
periods  each  day.  The  merchant  and  banker 
conduct    their    business    only    during   certain 

23 


Economics 

hours  of  the  day,  while  the  teacher  is  only 
employed  for  certain  hours  of  the  day  on  cer- 
tain days  of  the  week  and  during  certain  sea- 
sons of  the  year. 

In  the  Economic  Law  of  Production  or  the 
Economic  Law  of  Increasing  Returns,  the  ele- 
ment of  time  is  continuous.  The  farmer's 
crop  occupies  the  land  continuously  from  the 
time  the  crop  is  planted  until  the  time  the  crop 
is  harvested.  The  Architect's  building  occu- 
pies the  land  continuously  from  the  time  the 
building  is  erected  until  the  building  is  taken 
down  or  destroyed.  The  investment  of  the 
financier  is  continuous  from  the  time  the  first 
payment  is  made  until  the  entire  transaction 
is  settled.  In  finances,  a  note  never  takes  a 
vacation,  and  a  mortgage  never  sleeps.  In  all 
of  these  transactions  the  element  of  time  is 
continuous,  never  relaxing  for  a  second. 

34 


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1 


Economics 

CHAPTER  III. 
Production. 

In  nature  we  find  three  methods  of  produc- 
tion. Nature  collects  and  stores  her  surplus 
products  as  has  been  done  in  producing  the 
coal,  oil  and  gas  fields.  Nature  produces  by 
transforming  one  product  into  another  product 
as  is  done  by  the  farmer  when  he  applies  fer- 
tilizer to  the  soil  in  order  to  produce  the  de- 
sired crops.  Or,  nature  produces  by  means  of 
increasing.  That  is,  a  grain  of  corn  is  placed 
in  the  soil  and  nature  increases  that  grain  of 
corn  to  an  ear  of  corn. 

Man,  in  his  various  occupations,  has  fol- 
lowed practically  the  same  three  methods.  He 
stores  certain  parts  of  his  production,  at  least 
temporarily,  in  warehouses  or  elevators.     He 

35 


Economics 

transforms  the  wool  or  cotton  into  cloth  and 
the  cloth  into  clothing.  Or,  he  places  together 
certain  articles  to  produce  a  desired  product 
as  is  done  in  the  manufacture  of  steel  and 
glass. 

Probably  the  first  condition  that  needs  to  be 
considered  in  production  is  the  difference  be- 
tween discovery  and  invention.  Discovery 
and  invention  mark  the  boundary  line  between 
nature  and  man.  Some  one  discovered  the 
circle.  Some  one  invented  the  process  of 
dividing  the  circle  into  degrees,  minutes  and 
seconds  of  arc.  In  the  Law  of  Decreasing 
Returns  or  the  Law  of  Material,  production 
has  always  been  maintained  or  increased 
through  the  medium  of  discovery.  Some  one 
discovered  that  coal  will  burn  and  the  using  of 
coal  began.  Some  one  discovered  that  wheat 
will  sustain  life  and  the  cultivation  of  wheat 

36 


Economics 

began.  The  same  conditions  hold  true  for  all 
natural  products. 

In  the  second  Economic  Law,  the  Law  of 
Constant  Returns,  or  the  Law  of  Transforma- 
tion we  find  both  discovery  and  invention. 
Some  one  discovered  wool  and  cotton  and 
some  one  invented  the  process  of  spinning 
these  articles  into  yarn  and  weaving  the  yarn 
into  cloth.  Observation  shows  that  in  the  law 
of  Transformation,  production  may  be  as 
simple  as  melting  snow  to  produce  water  or 
as  difficult  and  complex  as  separating  the 
different  elements  from  oil  or  carving  marble 
to  produce  statuary. 

In  some  cases  production  proceeds  by  a 
succession  of  steps.  The  finished  product  of 
one  series  being  the  raw  material  of  the  fol- 
lowing series.  As  an  illustration,  wheat  is 
the  finished  product  of  the  farmer  but  the 

37 


Economics 

raw  material  of  the  miller.  Flour  is  the  fin- 
ished product  of  the  miller  but  the  raw  mate- 
rial of  the  baker.  While  bread  is  the  finished 
product  of  the  baker  but  the  raw  material  of 
the  housekeeper. 

In  the  third  law,  the  Law  of  Increasing 
Returns,  we  find  production  carried  on  en- 
tirely by  means  of  invention.  When  some 
one  discovered  that  wheat  will  sustain  life,  the 
farmer  was  compelled  to  avail  himself  of 
many  inventions  before  bread  became  a  com- 
mercial article  of  food. 

The  discovery  that  steam  will  lift  the  lid 
on  a  kettle  of  boiling  water  led  to  the  inven- 
tion of  the  steam  engine.  By  means  of  the 
steam  engine  heat  could  be  turned  into  power 
and  this  led  to  many  other  inventions.  Cor- 
porations were  formed  and  production  began 
on  a  large  scale.    Economically,  the  workings 

38 


Economics 

of  corporations  are  similar  to  the  workings 
of  individuals  as  will  be  seen  by  referring  to 
the  Economic  Table. 

Risk. 

Nature  clothes  a  portion  of  the  earth  with 
a  forest.  Lightning  starts  a  fire  in  the  forest 
and  the  fire  consumes  the  forest.  Whether 
this  condition  could  be  termed  an  accident,  a 
risk,  or  is  part  of  a  preconceived  plan  of 
nature,  we  have  no  way  of  proving.  In  other 
words  we  are  unable  to  prove  whether  or  not 
nature  assumes  any  risk  in  her  own  workings. 

In  man's  workings  with  nature,  nature  re- 
quires man  to  assume  risk.  When  he  shoots 
at  game,  the  hunter  risks  the  charge  for  his 
weapon.  The  farmer  risks  his  labor  in  pre- 
paring the  soil  and  the  necessary  seed  to  plant 
the  soil,  every  time  he  plants  a  crop.    In  many 

39 


Eco7iomics 

cases  the  manufacturer  must  risk  the  value 
of  his  raw  material,  fuel,  and  necessary  labor 
in  order  to  secure  a  desired  product.  Like- 
wise, the  financier  is  called  upon  to  assume 
many  and  various  kinds  of  risks.  The  time 
during  which  a  risk  exists,  varies.  In  the  case 
of  the  hunter,  he  knows  in  a  very  few  seconds 
whether  he  has  captured  his  game  or  wasted 
his  ammunition.  In  the  case  of  the  farmer, 
the  risk  is  from  seed  time  to  harvest,  which 
may  be  any  where  from  three  months 
to  ten  months.  With  the  aid  of  intelligence, 
care  and  experience,  the  element  of  risk  may 
be  reduced  to  such  a  point  as  to  be  practically 
negligible  from  an  economic  standpoint. 
However,  we  must  not  lose  sight  of  the  fact 
that  in  all  classes  of  production  risk  is  an 
element  that  at  any  time  may  prove  to  be  a 
serious  factor. 

40 


Economics 

Competition. 

The  weed  that  man  has  tried  to  destroy, 
springs  up  and  destroys  the  plant  that  man 
has  tried  to  cultivate.  Whether  or  not,  this 
is  a  survival  of  the  fittest,  from  an  economical 
stand  point,  it  is  certainly  not  the  survival  of 
the  most  valuable.  However,  it  does  illustrate 
competition. 

By  referring  to  the  Economic  Table  we  see 
that  all  industries  are  not  governed  by  the 
same  Economic  Law.  It  depends  very  largely 
on  which  Economic  Law  governs  an  industry 
as  to  how  competition  will  affect  that  industry. 
Where  nature  makes  no  charge  for  the  pro- 
duct, as  in  the  Law  of  Decreasing  Returns, 
competition  does  promote  more  scientific 
methods  in  production  and  does  decrease 
prices.  In  the  case  of  mining  Companies, 
competition  does  stimulate  production  and 
41 


Economics 

does  reduce  prices.  As  an  illustration,  take 
a  coal  field  in  which  fifty  different  companies 
are  operating.  In  this  case  the  price  of  coal 
is  always  set  by  the  consumer.  The  consumer 
will  purchase  from  the  Company  that  sells 
coal  for  the  least  price.  Economically,  this 
price  represents  the  cost  of  producing  coal 
under  the  most  adverse  circumstances. 
Hence,  any  competing  company  who  wants  a 
profit  will  be  compelled  to  gain  this  profit  by 
improved  methods  in  mining. 

Companies  whose  operations  come  under 
the  second  Economic  Law,  that  of  Constant 
Returns  are  invariably  controlled  by  outside 
forces.  Economically,  railroads  are  controlled 
by  the  shippers.  Hence,  competition  tends  to 
decrease  the  revenue  of  the  railroad.  That 
is,  the  shipper,  invariably,  will  patronize  the 
railroad  that  will  haul  his  goods  for  the  least 

42 


Economics 

4iioney.  If  the  revenue  of  the  railroad  is 
decreased  by  competition  or  any  other  method, 
until  there  is  not  sufficient  to  pay  running 
expenses  and  keep  the  equipment  in  running 
order  the  road  will  be  forced  out  of  business. 
In  the  Economic  Law  of  Increasing  Re- 
turns, economically,  the  price  of  the  product 
is  set  by  the  producer.  If  the  producer  is 
hindered  in  his  work  by  competition  it  will, 
necessarily,  increase  the  price  of  the  product. 
Since  competition  increases  the  price  of  the 
product  to  the  producer,  competition  likewise 
increases  the  price  of  the  product  to  the  con- 
sumer. That  is,  the  steelman  puts  together 
certain  products  found  in  nature  and  nature 
charges  him  a  certain  price  for  these  products. 
If  man  interferes  with  nature's  work,  nature 
charges  man  for  the  interference  and  man 
must  pay  the  bill.    Industries,  operating  under 

43 


Economics 

the  law  of  Increasing  Returns,  cannot  be  con- 
trolled by  competition.  These  industries  must 
be  controlled  by  some  other  method. 

In  the  field  of  production,  we  are  constantly 
called  upon  to  deal  with  the  problems  of 
equipment,  power,  disposing  of  valuable  by- 
products, etc.  Each  separate  plant  develops 
its  own  set  of  detail  problems.  Since  these 
problems  are  different  for  each  plant  it  seems 
better  to  leave  the  solution  of  these  problems 
to  the  Superintendent  or  Manager. 


44 


Economics 


CHAPTER  IV. 
Distribution. 

Nature's  forces  for  distribution  are  the 
winds,  the  streams  and  the  waves  of  the 
ocean.  For  many  centuries  man  availed  him- 
self of  practically  the  same  forces.  The 
streams  carried  his  rafts  and  canoes  while  the 
winds  blew  his  boats  across  the  ocean.  With 
the  invention  of  the  railroad  and  the  steam 
ship,  the  world  was  brought  under  the  sway 
of  mechanical  transportation.  With  the  more 
rapid  facilities  afforded  by  mechanical  trans- 
portation great  changes  have  been  brought 
about  in  the  methods  of  distribution.  On  a 
modern  breakfast  table,  we  may  find  codfish 
from  New  Foundland,  oranges  and  bananas 

45 


Economics 

from  the  tropics,  tea  from  China,  or  coffee 
from  Brazil.  This  shows,  conclusively,  that 
the  producer  and  consumer  may  live  in 
different  parts  of  the  earth  or  many  miles 
apart.  Such  being  the  case,  it  is  only  in  rare 
or  exceptional  cases,  that  the  producer  and 
consumer  deal  directly  with  each  other.  Be- 
tween the  producer  and  consumer  has  grown 
the  merchant. 

Under  present  business  conditions,  the  mer- 
chant buys  and  sells.  This  condition  places 
the  merchant  in  a  peculiar  economic  situation. 
The  merchant  sells  exactly  the  same  goods 
that  he  buys.  In  an  Economic  sense,  he 
neither  consumes  nor  produces.  This  condi- 
tion places  his  business  in  the  Economic  Law 
of  Transformation  or  the  Economic  Law  of 
Constant  Returns.  But,  in  his  purchases  the 
merchant  is  not  able  to  avail  himself  of  the 

46 


Economics 

Economic  Law  of  Transformation  but  must 
be  governed  by  the  Economic  Law  of  Pro- 
duction. That  is,  in  his  purchases,  the  mer- 
chant has  no  guarantee  that  he  will  ever  be 
able  to  sell  any  part  of  the  goods  he  purchases. 
Hence,  the  risk  that  the  merchant  must 
assume,  in  many  cases,  is  the  total  amount  of 
his  purchase.  The  merchant  is  likewise  ex- 
posed to  competition.  He  is  constantly  called 
upon  to  expose  his  wares  for  sale,  yet  the  only 
protection  the  merchant  has  is  the  protection 
he  provides  for  himself.  The  result  of  this 
method  of  doing  business  is: — that  the  mer- 
chant dominates  the  entire  commercial  situa- 
tion. The  merchant  sets  the  price  for  the 
Producer ;  he  sets  the  price  for  the  Consumer ; 
and  he  sets  the  amount  of  his  own  profit. 
To  substantiate  this  statement,  when  the 
merchant  buys  an  article  the  price  paid  must 

47 


Economics 

suit  the  merchant,  otherwise  the  merchant  will 
not  buy  the  article.  When  the  merchant  sells 
an  article,  the  selling  price  must  suit  the 
merchant,  otherwise  the  merchant  will  not 
sell  the  article.  The  profit,  on  an  article, 
represents  the  difference  between  the  cost 
price  and  the  selling  price.  Since  the  mer- 
chant fixes  both  the  cost  price  and  the  selling 
price,  he  at  the  same  time  fixes  his  own  profit. 
This  method  of  doing  business  is  unfair  to 
every  one.  It  is  unfair  to  the  producer,  for 
he  has  nothing  to  say  in  regard  to  the  value  of 
his  produce.  The  method  is  unfair  to  the 
merchant  on  account  of  the  risk  he  is  called 
upon  to  assume.  When  a  merchant  buys 
goods,  he  has  no  guarantee  that  he  will  ever 
be  able  to  sell  these  goods  to  any  person,  at 
any  price.  The  method  is  unfair  to  the  con- 
sumer for  it  does  not  allow  the  consumer  to 

48 


Economics 

use  any  intelligence  with  regard  to  his  pur- 
chases. With  the  consumer  it  is  simply  a 
case  of;  pay  the  merchant's  price  and  take 
the  article;  or,  refuse  to  pay  the  merchant's 
price  and  leave  the  article.  Under  existing 
conditions  this  is  probably  the  best  arrange- 
ment that  can  be  made.  The  question  is  how- 
to  change  the  conditions? 

The  farmer,  the  merchant,  the  manufac- 
turer and  various  other  people  are  taxed  to 
raaintain  the  public  schools.  The  public 
Schools  are  maintained,  exclusively,  for  edu- 
cating the  rising  generation.  Is  it  not  a  fair 
equation,  that  since  the  public  has  assisted  the 
child  to  an  education,  the  public  has  the  right 
to  require  the  child  to  use  that  education  in 
order  to  determine  its  own  wants  ?  Instead  of 
the  public  going  to  the  store  and  seeing  what 
they  can  get  and  what  the  merchant  has,  how 

49 


Economics 

would  it  be  for  the  public  to  go  to  the  store 
and  tell  the  merchant  what  they  want  ? 

With  such  an  arrangement,  what  would  be 
the  order  of  business?  It  would  be  necessary 
for  the  consumer  to  place  orders  at  least  a 
week,  in  advance.  The  merchant  having  his 
orders  could  employ  his  help  to  a  better  ad- 
vantage. Under  the  present  arrangement  the 
merchant  must  have  sufficient  help  to  take 
care  of  his  business  during  his  busiest  period ; 
at  other  times  there  is  little  that  this  help  can 
do.  If  he  has  his  orders,  in  advance,  he  can 
employ  his  force  continuously  until  his  orders 
are  filled.  If  he  works  on  a  commission,  he 
need  have  none  of  his  own  capital  invested, 
consequently  he  assumes  no  risk,  and  has  no 
interest  to  pay  on  capital  that  is  not  working. 
If  he  simply  buys  and  sells  his  business  con- 
trols him.    He  may  not  be  able  to  sell  when 

50 


Economics 

his  business  demands  that  he  should  sell.  If 
he  acts  as  a  commission  man,  he  simpy  orders 
from  the  producer  the  amount  the  consumer 
orders  from  him,  consequently  he  controls  his 
business. 

With  the  producer,  the  commission  form  of 
business  renders  production  more  flexible. 
The  producer  may  devote  special  efforts  to 
producing  certain  kinds  of  goods  or  a  com- 
mission man  secure  markets  for  goods  that 
a  merchant  would  refuse  to  buy.  In  buying 
and  selling,  either  perishable  or  non-perishable 
goods,  the  merchant  must  assume  a  tremen- 
dous financial  risk.  In  the  case  of  perishable 
goods,  the  goods  soon  become  unfit  for  use 
and  may  mean  a  total  loss,  financially.  In 
the  case  of  non-perishable  goods,  if  the  dry 
goods  merchant  turns  his  entire  capital  once 
every   one  hundred   days  then  each   day  he 

51 


Economics 

turns  one  percent  of  his  capital.  Hence,  the 
profit,  on  one  percent  of  his  investment  must 
be  sufficient  to  pay  his  entire  daily  expenses 
and  the  interest  on  ninety-nine  percent  of  his 
capital  that  is  lying  idle.  If  his  customers 
order  in  advance  and  he  simply  fills  their 
orders  he  need  have  no  fixed  capital  invested, 
consequently  he  has  no  interest  to  pay. 

In  buying  and  selling  the  merchant  does 
all  the  advertising.  In  a  commission  form  of 
business,  it  would  not  be  necessary  for  the 
commission  man  to  do  any  advertising.  The 
advertising  would  all  be  done  by  the  producer 
and  the  consumer.  In  a  commission  form  of 
business,  undoubtedly  it  would  be  necessary 
to  place  the  commission  man  under  bond  and 
perhaps  require  him  to  secure  a  government 
license. 


% 


Economics 


CHAPTER  V. 
Consumption. 

Distribution  and  consumption  are  so  closely 
allied  as  to  be  almost  inseparable.  While  giv- 
ing, trading,  buying  and  selling  might  be  con- 
sidered as  a  part  of  distribution,  we  will 
consider  these  conditions  as  a  part  of  con- 
sumption. When  the  savage  hunter  succeeded 
in  slaying  a  large  animal,  especially  during 
the  warm  season,  personally  he  could  only 
consume  a  small  portion  of  the  animal  before 
the  flesh  of  the  animal  became  unfit  for  use. 
In  order  that  game,  which  constituted  their 
main  food  supply,  might  not  become  scarce, 
the  savages  gave,  to  each  other,  such  supplies 
as  they  could  not  use  for  themselves.    That  is, 

53 


Economics 

to  the  savage,  giving  was  an  economic  neces- 
sity. When  man  domesticated  the  animals, 
different  men  reared  different  species  of  ani- 
mals; consequently  they  could  give  or  they 
could  trade.  That  is,  if  A.  had  horses  and  B. 
had  cattle  they  could  trade  so  many  horses 
for  so  many  cattle. 

With  the  inventions  of  governments,  came 
the  invention  of  a  medium  of  exchange  that 
we  know  as  money.  Then  man  began  legal- 
ized trading  and  finally  buying  and  selling. 
That  is,  if  A.  had  horses  and  B.  had  cattle 
and  they  wished  to  exchange,  A.  would  place 
a  cash  valuation  on  his  horses  and  B. 
would  place  a  cash  valuation  on  his  cattle. 
The  exchange  then  became  a  simple  arith- 
metical calculation.  Or,  using  the  same  valu- 
ation, A.  could  sell  to  B.  or  B.  could  sell  to 
A.  for  a  cash  consideration. 

54 


Economics 

This  exchanging  of  products  became  the 
field  of  the  merchant  and  for  an  indefinite 
period  of  time,  the  merchant  has  been  con- 
ducting a  small  business  in  legalized  trading. 
When  power  began  to  be  applied  to  manu- 
facturing, the  merchant  began  to  buy  and  sell 
on  an  extensive  scale.  On  account  of  the 
conditions  that  surrounded  him,  the  merchant 
was  compelled  to  guess  what  his  customers 
wanted  and  buy  accordingly.  If  he  made  a 
good  guess,  he  had  a  prosperous  business. 
If  he  made  a  poor  guess  he  had  his  goods 
on  his  hands. 

This  method  of  doing  business  has  always 
resulted  in  tremendous  financial  losses.  If 
the  goods  were  perishable,  the  loss  was  in 
goods  that  had  become  unfit  for  use  and  had 
to  be  destroyed.  If  the  goods  were  non- 
perishable,  the  loss  was  in  goods  that  could 

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Economics 

not  be  sold.  Capital  invested  is  lying  idle, 
hence  at  all  times  the  merchant  bears  a  tre- 
mendous loss  from  interest  on  idle  capital. 

The  merchant,  of  the  old  school,  was  not 
able  to  cope  with  this  situation.  He  worked 
for  nothing,  then  paid  for  the  privilege  of 
working  and  finally  failed.  The  modern 
merchant  has  met  this  condition  by  placing 
an  exorbitant  profit  on  his  goods  and  com- 
pelling the  consumer  to  pay  this  profit.  The 
result  is,  that  the  price  of  necessities  have 
risen  to  prohibitive  prices.  Among  the  work- 
ing classes,  the  high  cost  of  meat  has  caused 
serious  distress.  As  meat  passes  through 
several  stages  from  the  producer  to  the  con- 
sumer it  will  be  necessary  to  make  an  eco- 
nomic investigation  in  order  to  discover  the 
difficulty. 

We  find  that  the  farmer  rears  the  animals 
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Economics 

and  prepares  them  for  market.  He  turns  his 
surplus  hay,  grain  and  other  by-products  of 
the  farm,  that  have  little  commercial  value 
for  any  other  purpose,  into  cattle,  hogs  or 
sheep.  Since  the  farmer  reared  and  prepared 
these  animals  for  market  practically  from  the 
by-products  of  his  farm,  these  animals  have 
not  cost  the  farmer  very  much,  consequently 
he  can  afford  to  sell  them  at  a  reasonable 
price.  The  farmer  sells  his  cattle,  hogs  or 
sheep  to  a  packer  who  transforms  them  into 
beef,  pork  or  mutton.  For  this  transforma- 
tion, the  packer  has  proven  to  the  satisfaction 
of  every  one  that  he  realizes,  on  an  average,  a 
profit  of  about  one  dollar  per  head,  which 
does  not  seem  to  be  an  exorbitant  profit.  The 
packer  ships  the  carcasses  in  refrigerator  cars 
to  the  various  distributing  points.  If  animals 
are  shipped  long  distances  on  the  cars,  where 

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Economics 

they  are  deprived  of  their  regular  supply  of 
food  and  water,  the  animals  lose  seriously  in 
weight  and  the  animal  may  contract  disease. 
Hence,  it  is  more  economical  and  more  sani- 
tary to  slaughter  these  animals  close  to  where 
they  are  raised  and  ship  the  carcasses  in  re- 
frigerator cars  than  it  is  to  ship  the  animals 
alive,  half  way  across  the  continent. 

From  the  distributing  points,  the  packer 
sells  the  meat  to  the  retail  merchants.  Here 
we  find  difficulty  due  to  the  method  by  which 
the  retail  merchant  is  compelled  to  do  busi- 
ness. The  retail  merchant  is  dealing  with  a 
perishable  product,  yet  the  best  he  can  do  is 
to  guess  what  his  customers  want  and  buy 
accordingly.  The  result  is  that  he  must  have 
an  exorbitant  profit  to  cover  his  losses.  The 
farmer  is  not  to  blame;  the  packer  is  not  to 
blame ;  nor  the  retail  merchant  is  not  to  blame 

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Economics 

for  the  high  cost  of  meat.  The  blame  lies  in  the 
method  in  which  the  retail  merchant  is  com- 
pelled to  do  business. 

The  most  practical  method,  for  reducing 
the  present  high  prices,  seems  to  be  the  com- 
mission form  of  doing  business.  This  would 
necessitate  some  changes  from  the  present 
methods  of  doing  business.  First,  it  would 
be  necessary  for  the  consumer  to  assist  the 
merchant  by  placing  all  orders  in  advance. 
Second,  it  would  be  necessary,  for  the  govern- 
ment, to  standardize  all  goods  according  to 
national  standards.  When  a  merchant  has 
filled  an  order  with  standard  goods  he  has 
fulfilled  his  obligations  to  the  consumer. 

Before  agriculture  could  be  carried  on  suc- 
cessfully it  was  found  necessary  to  divide  the 
surface  of  the  earth  by  means  of  lines  thus 
confining   each   person   to   his   own   plot   of 

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Economics 

ground.  It  might  be  advantageous  to  use  simi- 
lar methods  with  the  merchant.  By  using  a 
commission  form,  a  merchant  should  be  able 
to  handle  goods  at  a  profit  not  exceeding  ten 
per  cent  and  get  rich  on  it. 


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Economics 


CHAPTER  VL 
Compensation. 

Referring  to  the  Economic  Table  we  see 
that  different  classes  of  people  are  engaged  in 
different  occupations,  hence,  the  logical  con- 
clusion would  be  that  they  receive  different 
compensations.  The  hunter  and  fisherman  is 
paid  with  his  catch.  He  may  do  much  labor 
and  receive  a  very  scanty  compensation  or  he 
may  do  but  little  labor  and  receive  a  very  gen- 
erous compensation.  The  stockraiser  is  paid 
with  the  products  of  his  flocks  and  herds.  The 
farmer  is  paid  with  the  increase  in  the  pro- 
ducts of  the  earth.  That  is,  the  farmer  plants 
a  grain  of  corn  and  in  return  gets  an  ear  of 
corn  and  a  stalk  of  fodder.    Those  who  work 

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Economics 

in  the  mineral  kingdom  are  paid  with  the  pro- 
ducts of  the  mineral  kingdom.  That  is  coal 
producers  are  paid  in  coal;  quarrymen  are 
paid  in  stone;  steelmen  are  paid  in  steel,  etc. 
Those  who  perform  useful  tasks  may  enjoy 
the  fruits  of  their  labor.  A  shoemaker  may 
make  a  pair  of  shoes  and  wear  them;  a  baker 
may  bake  a  loaf  of  bread  and  eat  it ;  or,  a  car- 
penter may  build  a  house  and  live  in  it.  These 
people  may  perform  these  same  tasks  for 
others  and  receive  wages.  Professional  people 
are  paid  in  fees,  merchants  are  paid  in  profits, 
financiers  are  paid  in  interest,  rents,  commis- 
sions, dividends  or  royalties,  and  all  other 
classes  receive  salaries. 

Salaries  arrange  themselves  into  three  gen- 
eral classes.  Those  who  are  paid  for  what 
they  can  do  or  produce.  Those  who  are  paid 
for  what  they  know  and  those  who  are  paid 

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Economics 

for  the  patronage  they  can  command.  The 
wages  of  those  engaged  in  the  various  lines  of 
manufacturing  are  generally  arranged  accord- 
ing to  the  amount  of  the  manufactured  article 
the  employee  can  produce.  Salaries  of  office 
employees,  teachers,  etc.,  are  generally  ar- 
ranged according  to  what  they  know.  In  spe- 
cial cases,  wages  may  be  arranged  according 
to  patronage.  The  services  of  a  clerk  in  a 
department  store,  who  has  many  wealthy 
friends  and  can  induce  these  friends  to  trade 
with  the  concern,  is  worth  more  to  the  con- 
cern than  the  services  of  a  person  who  has  no 
wealthy  friends.  In  politics,  the  man  who  can 
command  votes  may  be  paid  a  higher  salary 
for  his  services  than  the  man  who  simply  goes 
to  the  polls  and  votes.  In  finance,  the  person 
who  can  bring  the  money  or  influence  of  his 
wealthy  friends  into  a  business  can  command 

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Economics 

a  better  salary  than  the  person  who  has  rfo 
wealthy  friends. 

In  some  manufacturing  establishments 
profit  sharing,  with  the  employees,  has  been 
tried.  This  condition  does  not  affect  the  con- 
sumer. In  some  cases,  it  may  stimulate  the 
employees  to  greater  efforts  in  production. 
Generally,  it  leads  to  very  serious  differences 
of  opinion  between  the  management  and  the 
working  forces.  Opportunities  may  be  given 
to  the  workmen  to  suggest  different  methods 
of  operation  than  are  being  used.  If  the 
methods  suggested  result  in  decreasing  the 
cost  of  production,  the  workmen  may  be  given 
a  part  of  the  amount  saved.  That  kind  of 
profit  sharing,  is  economically  valuable  to  all 
parties  concerned. 

We  find  no  natural  or  economic  law  govern- 
ing fees.     A  person  may  blow  out  a  match 

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Economics 

and  save  valuable  property  from  being  de- 
stroyed by  fire.  The  value  of  his  labor  might 
be  calculated  from  an  economic  standpoint. 
But,  when  a  physician  saves  the  life  of  a 
valuable  member  of  society,  there  are  so  many 
complications  that  the  economic  value  of  his 
work  could  not  be  determined,  even  by  apply- 
ing the  rules  of  higher  mathematics. 

The  compensation  of  corporations  vary  ac- 
cording to  the  economic  law  that  controls  the 
corporation.  Where  nature  makes  no  charge 
for  the  product,  as  in  coal  operations  and 
kindred  transactions,  the  price  is  set  by  the 
consumer.  That  is,  the  producer  can  charge 
no  more  for  his  product  than  the  consumer 
is  willing  to  pay  or  can  be  made  to  pay. 

If  the  corporation  is  governed  by  the  second 
economic  law,  where  goods  are  simply  trans- 
ported from  one  point  to  another  point,  the 

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Economics 

freight  rate  is  determined  very  largely  by 
competition  with  other  means  of  transporta- 
tion. Economically,  all  transportation  com- 
panies are  controlled  by  outside  forces.  Eco- 
nomically railroads  are  controlled  by  the  ship- 
pers. This  brings  about  a  peculiar  situation 
in  the  operations  of  railroads.  If  the  railroads 
are  allowed  to  compete  against  each  other  they 
are  apt  to  bring  on  a  fight  of  the  Kilkenny  cats 
that  will  destroy  the  railroads.  If  the  rail- 
roads are  protected  by  law  they  are  quite  apt 
to  become  a  monopoly. 

If  the  corporation  is  controlled  by  the  third 
economic  law,  where  certain  articles  are  put 
together  to  produce  a  desired  product  then 
the  producer  sets  the  price  of  the  product. 
This  is  the  condition  imposed  upon  the  steel 
companies  and  similar  branches  of  manufac- 
turing.    The  more  opposition  that  is  placed 

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Economics 

in  the  way  of  steel  companies  and  similar 
branches  of  manufacturing  the  more  the 
product  will  cost  and  the  more  the  consumer 
will  have  to  pay  for  the  product. 

Incomes  from  investments  range  through 
all  the  Economic  Laws.  These  conditions  will 
be  discussed  under  investments. 


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Economics 


CHAPTER  VII. 
Valuation. 

Probably  the  first  step  necessary  in  the  study 
of  valuation  is  to  make  a  distinction  between 
wealth  and  capital.  Wealth  we  will  under- 
stand to  mean  such  things  as  flour,  coal,  oil, 
clothing,  etc.  Capital  we  will  understand  to 
mean  gold,  silver,  bank  notes,  stock,  bonds, 
mortgages,  etc.  From  this  we  see  that  the 
value  of  wealth  is  determined  by  nature  while 
the  value  of  capital  is  determined  by  govern- 
ments. That  is,  the  value  of  flour  is  the  length 
of  time  it  will  sustain  life.  The  value  of  coal 
is  the  amount  of  heat  it  will  produce,  etc., 
while  the  value  of  money  is  in  the  amount  of 
these  articles  that  a  given  sum  of  money  will 

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Economics 

buy.  As  the  population  of  the  earth  increases, 
the  necessity  for  wealth  increases.  Hence,  the 
tendency  of  the  value  of  wealth  is  to  constantly 
increase.  Using  gold  as  a  standard  for  capital, 
the  gold  mines  of  the  earth  are  constantly 
pouring  their  entire  product  into  the  capital 
or  money  market.  Hence,  the  constant  ten- 
dency of  capital  is  to  decrease  in  value. 

Since  the  formation  of  governments,  the 
governments  have  maintained  a  standard  med- 
ium of  exchange  which  we  know  as  money. 
Money  has  proven  itself  to  be  very  satisfac- 
tory as  a  medium  of  exchange,  but  money  has 
not  proven  itself  to  be  satisfactory  as  a 
standard  of  value.  In  commercial  transac- 
tions the  value  of  money  varies  or  fluctuates. 
Using  the  American  dollar  as  an  illustration. 
At  the  same  period,  a  dollar  will  buy  different 
amounts  of  the  same  grade  of  article  in  dif- 


Economics 

ferent  markets.  Or,  using  different  periods,  a 
dollar  will  buy  different  amounts  of  the  same 
grade  of  article,  in  the  same  market.  Except 
in  the  measurement  of  money,  money  has 
proven  itself  to  be  simply  a  medium  of  ex- 
change and  not  a  standard  of  value. 

This  fluctuation  of  the  value  of  capital  is 
proving  to  be  a  very  serious  problem  with  the 
wage  earner.  The  wage  earner  transforms 
his  time,  energy,  talents,  etc.,  into  wealth  but 
he  receives  his  pay  in  capital.  Literally,  the 
wage-earner's  head  is  fastened  in  wealth  and 
his  feet  are  fastened  in  capital.  With  the  con- 
stant tendency  of  wealth  and  capital  to  sepa- 
rate this  condition  nearly  stretches  the  life  out 
of  the  wage-earner. 

The  wage-earner  is  worthy  of  his  hire.  If 
he  produces  wealth,  then  he  is  entitled  to  be 
paid  in  wealth  or  its  cash  equivalent.    Owing 

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Economics 

to  our  economic  relations,  conditions  that  suit 
one  class  of  persons  will  not  suit  other  classes 
of  persons  and,  generally,  what  one  class  of 
persons  want  other  classes  of  persons  do  not 
want.  Referring  to  the  economic  table  we  see 
that  the  ideas,  desires  and  occupations  of  each 
class  of  persons  remains  distinctly  separate 
except  in  one  condition : — all  people  must  eat 
in  order  to  live.  The  standard  article  of  food, 
in  all  civilized  countries,  is  wheat  bread. 
Wheat  bread  is  made  from  wheat  flour ;  wheat 
flour  is  made  from  wheat  and  wheat  is  pro- 
duced from  the  soil. 

In  order  to  secure  a  standard  of  value,  place 
an  able  bodied  man  on  a  plot  of  ground  for  a 
period  of  ten  hours.  Let  him  devote  his  ener- 
gies to  the  cultivation  of  wheat.  Whatever  he 
can  produce,  that  is  his  wages.  By  a  careful 
system  of  calculations,  it  has  been  found  that 

n 


Economics 

he  will  produce  one  and  three-fourths  bushels. 
One  and  three- fourths  bushels  of  wheat,  or  its 
cash  equivalent,  then  becomes  our  standard  of 
value.  It  matters  not,  whether  it  is  necessary 
to  sell  wheat  at  five  cents  per  bushel  or  five 
dollars  per  bushel,  ten  hours  of  unskilled 
labor  is  always  worth  one  and  three-fourths 
bushels  of  wheat,  or  its  cash  equivalent. 

The  valuation  of  property  will  be  treated 
more  fully  under  taxation  and  the  valuation 
of  manufacturing  plants  will  be  treated  more 
fully  under  investments. 


72 


PART  II. 

Engineering  Conditions 


CHAPTER  VIII. 
Investments  in  Natural  Products. 

Natural  Investments,  we  will  infer,  to  mean 
investments  in  land  and  the  direct  products 
of  land.  Investments  in  land  may  be  consid- 
ered under  either  one  of  three  conditions. 
First — what  the  land  will  yield;  Second — 
what  the  land  will  produce ;  Third — what  the 
land  will  earn. 

Investments  for  what  land  will  yield  refers 
entirely  to  mineral  lands.  Unless  the  mineral 
occurs  in  large  bodies,  where  it  can  be  defi- 
nitely located,  the  recovery  of  the  mineral  is 
more  or  less  of  a  gambling  proposition.  A 
gambling  proposition,  we  will  infer  is  a  propo- 
sition that  cannot  be  calculated  or  estimated. 
In  the  gas  and  oil  business,  a  small  investment 

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Jiconomics 

may  yield  large  returns  or  a  large  investment 
may  yield  no  returns.  Considering  the  gam- 
bling proposition  as  beyond  the  scope  of  our 
present  study,  we  will  confine  our  attention  to 
large  bodies  of  minerals,  especially  coal. 

Practically  all  coal  mining  is  done  by  large 
corporations  and  the  corporations  gain  control 
of  the  coal  cither  by  one  of  three  methods. 
The  first  method  is  where  the  corporation 
leases  the  coal  and  pays  the  owner  a  royalty 
of  so  much  per  ton  at  the  time  of  mining.  No 
time  being  specified  as  to  when  the  mining 
shall  be  done,  nor  how  much  coal  must  be 
mined  during  any  particular  year;  stating 
however,  that  all  royalties,  due,  must  be  paid 
at  stated  periods.  This  method  permits  min- 
ing to  be  conducted  during  an  indefinite 
period.  If  for  any  reason  no  mining  is  done, 
no  royalties  are  due. 

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Economics 

The  second  method  is  to  specify  the  amount 
of  royalty  to  be  paid  and  the  number  of  tons 
to  be  mined  each  year.  Specifying  that  the 
amount  of  royalty  stated  must  be  paid  each 
year  even  if  no  mining  is  done.  The  third 
condition  is  for  the  corporation  to  own  the 
coal. 

By  using  either  the  first  or  second  methods, 
the  corporation  pays  a  royalty,  but  has  no 
taxes  or  interest  on  investment  to  pay.  By 
using  the  third  method,  the  corporation  pays 
no  royalty,  but  has  taxes  and  interest  on  in- 
vestment to  pay.  Investments  in  mineral  lands 
are  absolute  or  closed  investments.  That  is, 
they  yield  absolutely  no  return  until  the  time 
of  mining.  At  the  time  of  mining,  the  profit 
must  be  equal  to  any  previous  price  paid,  plus 
the  accrued  interest  on  that  price,  plus  taxa- 
tion.    Under   existing    conditions,    minerals 

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Economics 

double  in  value  once  in  about  every  ten  years. 
As  previously  shown,  the  price  of  minerals  is 
controlled  by  the  consumer.  By  doubling  the 
value  every  ten  years,  minerals  soon  become 
so  valuable  that  they  cannot  be  used  for  com- 
mercial purposes;  hence  the  manufacturer  re- 
fuses to  buy.  From  the  conditions  stated  it 
can  readily  be  seen  that  investments  in  large 
acreages  of  high  priced  mineral  lands  may  lead 
to  serious  financial  difficulties. 

In  the  second  condition,  where  investments 
are  made  in  land  for  what  the  land  will  pro- 
duce, refers  largely  to  agricultural  pursuits. 
Owing  to  moisture  or  lack  of  moisture,  three 
conditions  have  arisen  in  agriculture.  First — 
where  the  moisture  is  furnished  by  the  ordin- 
ary rain  fall;  Second — where  the  moisture  is 
scanty  or  periodic;  Third — where  man  pro- 
vides moisture  by  artificial  means. 

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Economics 

The  first  condition  implies  the  agriculture 
that  has  been  conducted  in  different  parts  of 
the  earth  for  centuries.  The  problems  in- 
volved are  such  as  have  been  solved  by  every 
successful  farmer.  In  going  into  a  new  coun- 
try, that  has  a  good  climate  and  large  annual 
rainfall,  the  prospective  farmer  naturally 
would  expect  to  find  timber  for  buildings  and 
perhaps  fish  and  game  to  assist  in  a  livelihood 
from  seed  time  to  harvest. 

Dry  Farming. 

In  certain  portions  of  the  earth  there  are 
areas  where  the  climate  may  be  good,  but  the 
rain  fall  is  scanty  or  periodic.  In  these  sec- 
tions have  grown  up  what  is  known  as  Dry 
Farming.  In  addition  to  the  ordinary  prob- 
lems of  sowing  and  harvesting,  the  first  prob- 
lem the  Dry  Farmer  will  need  to  consider 

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Economics 

is: — how  to  retain  the  scanty  or  periodic 
supply  of  moisture?  As  he  is  experimenting 
with  a  natural  condition,  that  of  retaining  the 
scanty  supply  of  moisture  in  the  soil,  he  would, 
necessarily,  have  to  gain  his  education,  large- 
ly, by  means  of  experience.  This  might  mean 
expensive  crop  failures.  In  addition,  the 
prospective  Dry  Farmer,  going  into  an  arid 
or  semi-arid  district,  would  undoubtedly  find 
less  timber  for  buildings  and  perhaps  less  fish 
and  game  to  assist  from  seed  time  to  harvest. 

Irrigation  Farming. 

Before  man  could  till  the  soil  of  the  desert, 
he  was  compelled  to  furnish  moisture  for  the 
soil.  This  was  accomplished  by  building  dams 
and  grading  ditches.  This  calls  for  the  work 
of  the  engineer  and  the  capitalist.  The  work 
of  the  engineer  includes  not  only  the  building 

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Economics 

of  the  dam,  but  also  the  location  of  the  ditches 
and  the  grading  of  the  land. 

After  the  engineer's  work  is  completed,  an 
interesting  question  arises  as  to  the  control 
of  the  water  supply.  Every  farmer,  in  an 
irrigation  project  is  interested  in  the  water 
supply.  But,  he  is  also  interested  in  his  own 
work  and  not  interested  in  his  neighbors'  work. 

If  the  water  supply  is  controlled  by  inter- 
ested parties,  in  case  of  accident  or  shortage, 
naturally  there  would  be  serious  difficulty 
among  the  farmers.  If  A  and  B  are  two 
farmers  in  an  irrigation  project  and  they  can- 
not agree  among  themselves,  their  differences 
will  have  to  be  settled  in  Court.  These  condi- 
tions seem  to  point  to  the  logical  conclusion 
that  the  person  in  charge  of  the  water  supply, 
in  an  irrigation  project,  must  be  a  disinterested 
party,  preferably  a  government  official. 

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Economics 

Since  it  is  only  necessary  to  irrigate  land 
that  is  naturally  devoid  of  moisture,  the  pros- 
pective irrigation  Farmer  would  find  no  tim- 
ber on  his  land  to  assist  in  buildings.  Since 
the  desert  is  always  a  barren  waste,  he  would 
probably  find  very  little  of  anything  else  that 
would  assist  him  from  seed  time  to  harvest. 

Scientific  Farming.. 

When  land,  that  once  yielded  abundantly, 
refuses  to  yield,  the  farmer  knows  that  some 
element  is  lacking.  In  order  to  ascertain  what 
this  element  is,  the  farmer  has  called  the 
chemist  to  assist  him  and  inaugurate  what  is 
known  as  Scientific  Farming.  The  Scientific 
Farmer  may  find  it  cheaper  and  more  conven- 
ient to  have  a  chemist  analyze  the  soil  for  him, 
but  in  order  to  intelligently  follow  the  chem- 
ists' analysis,  it  would  seem  necessary  for  the 

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farmer  also  to  have  a  working  knowledge  of 
chemistry. 

Scientific  Feeding. 

Closely  allied  with  scientific  farming,  is 
scientific  feeding.  Generally  in  feeding  the 
farmer  has  one  of  three  objects  in  view. 
Either  to  increase  the  size  of  the  animal;  to 
cause  the  animal  to  yield  a  product  in  the  way 
of  work,  milk,  eggs  or  wool;  or,  to  cause  the 
animal  to  increase  in  weight  in  preparation 
for  market. 

If  the  animal  is  fed  with  the  idea  of  in- 
creasing its  size,  its  food  must  nourish  all 
parts  of  the  body.  Hence,  the  food  must  be 
a  balance  ration  with  frequent  changes.  After 
the  animal  has  attained  its  growth  and  is  fed 
with  a  view  of  yielding  a  product  its  ration 
becomes  unbalanced  with  little  if  any  change. 

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Economics 

As  an  illustration,  if  fed  at  regular  intervals, 
working  horses  may  be  fed  the  same  ration, 
day  after  day,  and  remain  in  perfect  health. 
If  the  animal  is  fed  with  a  view  to  increasing 
its  weight  for  market,  the  ration  may  be  un- 
balanced but  should  contain  a  product  rich  in 
carbon. 

Growth. 

Referring  to  the  Economic  Laws  as  pre- 
viously explained,  growth  would  occur  in  the 
Economic  Law  of  Increasing  Returns,  or  the 
Economic  Law  of  Production.  In  youth,  a 
certain  portion  of  the  food  consumed  remains 
as  a  permanent  investment.  That  is,  the  ani- 
mal or  plant  increases  in  size  and  weight. 
This  result  can  only  be  obtained  by  retaining 
a  portion  of  the  food  consumed.  After  the 
animal  or  plant  has  obtained  its  growth,  the 
food  consumed  is  simply  transformed.    That 

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is,  the  animal  or  plant  no  longer  increases  in 
size  or  weight  but  its  ability  for  doing  work 
increases.  In  old  age,  the  size  or  weight  of 
the  body  no  longer  increases  nor  is  the  body 
capable  of  performing  hard  tasks.  On  the 
other  hand,  in  old  age  there  is  a  general  ten- 
dency for  the  body  to  decrease  in  weight. 
This  would  seem  to  show  that  in  old  age  life 
is  at  least  partly  sustained  from  the  forces 
stored  in  youth.  Hence,  we  see  that  it  is  the 
young  animal  or  plant  that  needs  an  abun- 
dance of  food  if  it  is  to  properly  develop. 

Serious  conditions  may  arise  in  after  life, 
if  a  young  animal  or  plant  has  been  deprived 
of  its  proper  amount  of  food  or  moisture. 

The  third  condition,  where  investments  are 
made  in  land  for  what  the  land  will  earn, 
refers  principally  to  investments  in  city  prop- 
erty.    This  condition  will  be  treated  under 

taxation. 

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CHAPTER  IX. 

Investments  in   Commercial   Products. 

Commercial  Investments  seem  to  follow 
very  closely  the  Economic  Laws.  First,  in- 
vestments in  material;  second,  investments  in 
transportation  facilities;  third,  investments  in 
Manufacturing  Plants.  Investments  in  Min- 
eral lands,  as  described  in  the  preceding  chap- 
ter, are  practically  applicable  to  all  investments 
in  material.  That  is,  large  sums  of  money  in- 
vested in  high  priced  material,  if  the  pur- 
chaser has  no  definite  knowledge  as  to  when 
the  material  is  to  be  sold,  may  lead  into  serious 
financial  difficulties. 

Investors  in  transportation  facilities  and 
manufacturing  plants  need  to  guard  constant- 

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ly  against  over  capitalization.  Over  capitaliza- 
tion may  occur  in  different  manners  or  may 
be  the  effect  of  different  causes.  After  all 
operating  expenses  are  paid,  if  the  net  pro- 
ceeds from  the  plant  will  pay  the  legal  rate  of 
interest  on  the  capital  invested  to  produce  the 
plant,  the  plant  will  not  be  considered  as  over 
capitalized. 

Building  Plant. 

The  first  step,  in  over  capitalization,  is  the 
building  of  the  plant.  If  the  plant  is  built, 
when  the  cost  for  labor  and  material  are  ab- 
normally high,  the  first  cost  of  the  plant  will 
be  abnormally  high.  When  the  cost  of  labor 
and  material  again  sink  to  normal  proportions, 
the  plant  may  be  found  to  be  over  capitalized. 
That  is,  the  net  proceeds  from  the  plant  may 
not  be  sufficient  to  pay  the  legal  rate  of  inter- 

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est  on  the  capital  invested  to  produce  the  plant. 

Change  of  Alignment  on  Railroads. 

In  railroads,  change  of  alignment  may  cause 
the  road  to  become  over  capitalized.  Many 
railroads  are  built  with  the  idea  that  at  some 
future  time  expensive  changes  will  be  made 
in  the  alignment.  If  these  changes  are  paid  for 
out  of  the  earnings  of  the  road,  the  property 
is  permanently  improved.  But,  if  these  im- 
provements are  paid  for  by  means  of  bond 
issues,  the  road  may  become  over  capitalized. 

As  an  illustration,  a  section  of  road  five 
miles  in  length  is  to  be  improved.  That  means 
that  five  miles  of  new  track  is  added  to  the 
system.  But,  it  also  means  that  five  miles  of 
previous  track  has  been  destroyed.  If  this 
improvement  is  paid  for  from  the  surplus 
earnings  of  the  road,  the  road  is  permanently 

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improved.  The  road  is  investing  its  own 
earnings  in  an  improvement.  Whatever 
sum  this  improvement  earns  can  be  cred- 
ited directly  to  the  earning  power  of  the  road, 
minus  the  interest  on  the  original  cost  of  the 
five  miles  of  road  that  was  destroyed  by  the 
improvement.  But,  if  the  government  is  paid 
for  by  means  of  bond  issues,  the  road  is  in- 
vesting borrowed  capital.  Hence,  the  road 
must  deduct  from  its  earning  power  not  only 
the  interest  on  the  bond  issue,  that  was  neces- 
sary to  pay  for  the  improvement,  but  also 
the  interest  on  the  first  cost  of  the  five  miles 
of  road  that  it  was  necessary  to  destroy  in 
order  to  create  the  improvement. 

Competition. 

Transportation  facilities  may  become  over 
capitalized  by  being  paralleled  by  other  trans- 

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portation  facilities.  Steam  roads  may  be 
paralleled  by  other  steam  roads  or  by  electric 
roads.  Or,  railroads  may  be  paralleled  by 
steam-ship  lines.  In  either  case,  the  traffic 
is  deflected  until  the  net  income  is  not  suffi- 
cient to  pay  the  legal  rate  of  interest  on  the 
capital  invested. 

Manufacturing  Plants. 

In  the  case  of  manufacturing  plants,  inven- 
tions may  cause  a  sudden  demand  for  some 
new  article.  Expensive  plants  are  built  to 
meet  this  demand.  In  a  comparatively  short 
time  the  demand  for  the  article  is  supplied  and 
the  plants  become  idle.  If  no  other  use  can 
be  found  for  the  plant,  it  remains  permanent- 
ly idle  and  consequently  becomes  a  total  loss. 
Conditions  may  arise  where  the  plant  can  be 
used  for  other  purposes  and  a  part,  or  the 

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whole,  of  the  investment  saved.  In  other 
cases,  it  may  be  possible  to  move  the  plant  to 
a  new  site,  either  in  a  different  town  or  a 
different  part  of  the  country.  In  either  case, 
a  part  or  the  whole  value  of  the  plant  may  be 
saved. 

Cases  very  often  arise  where  a  plant  may 
be  bought  by  a  competing  firm  and  the  plant 
dismantled.  In  that  case  the  plant  becomes  a 
total  loss.  Business  conditions  may  be  such  as 
to  make  such  a  procedure  economical.  There 
may  be  business  enough  to  keep  one  plant  in 
operation  but  not  business  enough  to  keep 
both  plants  in  operation.  In  that  case  it  might 
be  more  economical  to  dismantle  one  plant  and 
recover  as  much  as  possible  from  the  scrap. 

Supply  and  Demand. 
In  making  investments  the  commercial  man 
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Economics 

is  constantly  called  upon  to  cope  with  the  con- 
dition of  supply  and  demand.  Supply  and 
Demand  is  the  thermometer  of  trade  and 
bears  about  the  same  relation  to  trade  that  the 
thermometer  bears  to  the  weather.  That  is, 
supply  and  demand  measures  trade. 

Overhead  Expense. 

Again,  the  commercial  investor,  is  constant- 
ly called  upon  to  cope  with  the  condition  of 
Overhead  Expense.  Overhead  Expense,  we 
will  infer  to  mean  those  conditions  that  can- 
not be  accurately  estimated.  "  Overhead  Ex- 
pense would  include  such  conditions  as  deteri- 
orations of  buildings,  bridges,  tracks,  and 
rolling  stock  on  railroads.  Deterioration  of 
plant  and  machinery  in  manufacturing  con- 
cerns. Deterioration  of  goods  and  store  fix- 
tures with  the  merchant.    The  conditions  vary 

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so  widely  that  no  general  method  can  be  used 
to  estimate  the  conditions,  except  to  deduct  a 
certain  percentage  annually  from  the  original 
cost  of  the  plant.  In  special  cases,  special 
methods  might  be  devised.  Experience  has 
taught  that,  barring  accident,  a  locomotive  can 
be  estimated  to  run  a  certain  number  of  miles 
without  repair.  Dividing  this  distance  into 
the  cost  of  repairing  a  locomotive  will  give, 
very  closely,  the  cost  per  mile  of  running  a 
locomotive.  In  all  mercantile  investments, 
overhead  expense  becomes  a  serious  item. 
The  conditions  affecting  mercantile  invest- 
ments were  treated  under  Distribution  and 
Consumption.  It  does  not  seem  necessary  to 
repeat  them. 


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CHAPTER  X. 
Financial  Investments. 

Financial  Investments  seem  to  follow  three 
general  conditions.  Investments  in  buying 
articles,  or  ownership;  investments  that  will 
give  control,  and  investments  that  will  yield 
an  income.  In  buying  an  article,  three  condi- 
tions, again,  present  themselves.  The  article 
may  be  bought  with  the  idea  of  using  it.  The 
article  may  be  bought  with  the  idea  of,  again, 
selling  it;  or,  the  article  may  be  bought  with 
the  idea  of  exchanging  it  for  some  other 
article. 

The  article  may  be  used  until  it  has  no  fur- 
ther commercial  value;  as  food  that  has  been 
consumed  or  clothing  that  has  been  worn  out. 

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Economics 

In  such  a  case,  the  cost  would  be  the  total  cost 
of  the  article.  Or,  the  article  may  be  used  for 
an  indefinite  period  and  again  resold.  This 
condition  would  include  real  estate  that  has 
been  used  for  a  home  but  more  particularly 
contractors'  supplies.  In  either  case  the  profit 
or  loss  would  be  first  cost  plus  the  amount 
earned  by  the  article  during  the  time  of  own- 
ership, minus  the  selling  price. 

Probably  no  field  of  labor  calls  for  a  wider 
use  of  practical  economics  than  that  of 
handling  contractors'  supplies.  The  contrac- 
tor is  always  bound  by  a  time  limit  that  is 
specified  in  the  contract.  Generally,  the  con- 
tract specifies  that  the  contractor  must  pay 
a  certain  sum  for  each  day  that  the  work  re- 
mains unfinished,  after  the  time  limit  has  ex- 
pired. This  condition  is  known,  among  con- 
tractors, as  a  penalty.    Some  contracts  specify, 

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Economics 

that  the  contractor  will  be  paid  a  certain  sum 
for  each  day  that  the  work  is  completed,  be- 
fore the  time  limit,  specified  in  the  contract, 
expires.  This  condition  is  known  as  a  bonus. 
The  penalty  clause  and  the  bonus  clause,  in  a 
contract,  are  not  always  enforced  although  it 
is  never  safe  to  entirely  ignore  them. 

Estimating  Contracts. 

The  first  step,  we  will  consider  is  estimating 
the  contract.  As  an  illustration,  we  will  use 
a  contract  for  a  building.  In  actual  construc- 
tion, it  is  always  necessary  to  begin  with  the 
foundation  and  construct  the  building  item  by 
item  until  the  building  is  completed.  In  esti- 
mating we  use  just  the  reverse  process.  As 
an  illustration,  painting  is  the  last  item  in  con- 
struction. Then  painting  is  the  first  item  to 
be  considered  in  the  estimate.    Checking  back 

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Economics 

item  by  item  and  noting  the  time  required  to 
construct  each  item,  we  finally  come  to  the 
foundations.  By  deducting  the  total  time  re- 
quired to  construct  the  various  items,  from 
the  time  specified  in  the  contract,  gives  the 
time  left  to  construct  the  foundations.  If  this 
time  is  amply  sufficient  to  construct  the  foun- 
dations, it  is  safe  to  assume  that  the  building 
can  be  completed,  in  the  time  specified. 

In  estimating,  certain  conditions  need  to  be 
taken  into  consideration.  If  the  time  speci- 
fied is  for  a  year  or  more  the  price  of  labor 
and  the  price  of  material  may  be  advanced  in 
the  meantime.  The  distance  that  machinery 
and  material  must  be  moved  and  the  kind  of 
roads  available;  whether  or  not  it  will  be 
necessary  to  construct  roads  in  order  to  get 
machinery  and  material  on  the  job ;  if  the  con- 
tract must  be  in  operation  during  different 

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Economics 

seasons  of  the  year  it  may  be  necessary  to 
take  atmospheric  conditions  into  consideration. 
Any,  or  all  of  these  conditions  may  occur  dur- 
ing some  stage  of  the  work. 

Sub-Contracting. 

In  large  jobs,  it  is  quite  customary  for  one 
contractor  to  contract  for  all  the  work  and 
then  sub-contract  certain  portions  to  other 
contractors.  The  economic  conditions  that 
govern  the  sub-contractor  are  the  same  as  the 
economic  conditions  that  govern  the  con- 
tractor, hence,  in  the  discussion  the  sub-con- 
tractor may  be  ignored.  Whether  it  is  cheap- 
er to  use  hand  work  or  machine  work,  much 
or  little  equipment,  depends  entirely  upon 
local  conditions.  If  too  many  men  are  placed 
in  a  small  territory  the  men  get  in  each  other's 

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Economics 

way,  hence  they  cannot  work  to  the  best  ad- 
vantage. 

Contracting  Machinery. 

Contracting  machinery  is  always  subjected 
to  hard  usage,  hence,  the  deterioration  is  great 
and  parts  are  Hable  to  break,  at  any  time.  To 
guard  against  this  condition,  all  contracting 
machinery  is  made  so  that  the  parts  can  be  re- 
placed. In  case  of  a  breakdown,  a  contractor 
must  immediately  consider  three  conditions. 
His  plant  is  idle,  hence,  it  is  not  earning  any- 
thing. His  working  force  is  idle  and  he  may 
have  to  pay  them.  His  work  is  not  progress- 
ing, hence,  in  the  end,  it  may  make  him  liable 
to  a  penalty  or  at  least  decrease  his  chance  of 
earning  a  bonus.  In  view  of  these  losses,  it  is 
self  evident,  that  the  most  economical  course 
for  a  contractor,  is  to  have  duplicate  parts  of 

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Economics 

every  machine  on  hand  and  a  man  on  the  job 
who  can  put  those  parts  into  place  as  quickly 
as  possible. 

Interruption  of  Work. 

Losses  due  to  interruption  in  operations, 
vary  in  direct  proportion  w^ith  the  number  of 
men  employed.  If  sixty  men  are  employed, 
an  interruption  of  one  minute  means  a  total 
loss  of  one  hour,  for  one  man.  If  six  hundred 
men  are  employed,  an  interruption  of  one  min- 
ute means  a  total  loss  of  ten  hours,  for  one 
man.  Hence,  it  will  be  readily  seen,  that  in 
work  where  much  blasting  is  required  and  a 
large  force  of  men  are  employed,  it  is  more 
economical  to  have  the  blasting  done,  either 
in  the  morning,  before  the  men  begin  work; 
at  noon,  when  the  men  are  at  dinner,  or,  in 
the  evening,  after  the  men  have  quit  work, 

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Work  During  Storms. 

When  it  is  necessary  to  conduct  work  dur- 
ing the  winter  months,  aside  from  the  humane 
feature,  is  it  economical  to  continually  work 
stock  and  men  during  cold  winter  storms? 
Under  normal  conditions,  of  clear  or  cloudy 
skies,  stock  and  men  must  exert  a  certain 
amount  of  energy  in  order  to  perform  the 
tasks  required  of  them.  If  work  is  continued 
during  a  storm,  they  must  not  only  exert  their 
usual  amount  of  energy  but  they  must  also 
exert  an  additional  amount  of  energy  to  with- 
stand the  storm.  The  general  tendency  is  to 
weaken  both  man  and  beast,  so  that  after  the 
storm  is  over,  they  do  not  exert  their  former 
energy. 

Very  often,  contractors  are  called  upon  to 
pass  final  judgment  on  what  may  be  treacher- 

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Economics 

ous  foundation  material.  A  good  rule  is 
this : —  When  in  doubt,  soak  the  material  in 
water  for  twenty-four  hours  and  note  what 
happens. 

When  articles  are  bought,  with  the  idea  of 
again  selling  them,  it  brings  in  the  condition 
of  merchandise,  which  has  been  discussed  in 
previous  chapters.  When  articles  are  bought 
with  the  idea  of  exchanging  them  for  other 
articles  it  brings  in  the  condition  of  trade. 
This  trade  is  very  often  conducted  with  dif- 
ferent Races  of  people,  in  remote  parts  of  the 
world.  The  conditions  are  so  remote,  that 
they  will  not  permit  of  an  economic  discus- 
sion. 

Commissions,  Options,  Rents. 

Investments,  that  are  made  with  the  idea  of 
obtaining   control,    divides   into   two   classes. 

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Conditions  where  the  control  is  for  a  defined 
period  of  time ;  and  conditions  where  the  con- 
trol is  for  an  undefined  period  of  time.  Con- 
trol, for  a  defined  period  of  time,  assumes  one 
of  three  forms.  It  may  be  in  the  form  of  a 
commission;  in  the  form  of  an  option;  or,  in 
the  form  of  a  rent.  That  is,  A.  may  desire  to 
buy  or  sell  property.  B.  may  agree  to  pur- 
chase property  for  A.  or  agree  to  find  a  pur- 
chaser for  A.'s  property.  If  B.  is  successful, 
A.  pays  B.  a  certain  sum  that  is  known  as  a 
commission.  If  B.  is  unsuccessful,  he  re- 
ceived no  pay  for  his  labor.  A  commission  is 
a  sum  paid  or  received  for  the  purchase  or 
sale  of  property. 

In  the  second  case  A.  owns  property  that  he 
values  at  Ten  Thousand  Dollars.  For  a  cer- 
tain specified  sum  paid  by  B.,  A.  agrees  to  sell 
this  property  to  B.  any  time  within  a  specified 

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time,  for  the  sum  of  Ten  Thousand  Dollars. 
B.,  now  has  an  option  on  A.'s  property.  If 
during  the  time  specified  B.  is  able  to  sell  this 
property  for  Fifteen  Thousand  Dollars,  B.'s 
portion  of  the  selling  price  is  Five  Thousand 
Dollars.  If  B.  is  not  able  to  sell  the  property, 
by  the  end  of  the  time  specified,  the  control  of 
the  property  reverts  back  to  A.  and  B.  loses 
whatever  sum  he  paid  to  A.  That  is,  an  op- 
tion,— is  a  sum  paid  or  received  for  the  privi- 
lege of  controlling  the  value  of  property,  for  a 
defined  period  of  time.  In  the  third  case,  A. 
owns  a  house  and  B.  lives  in  the  house.  For 
this  privilege  B.  pays  to  A.  a  certain  defined 
sum  for  a  certain  defined  period  of  time.  This 
sum  is  known  as  a  rent.  Rent  is  a  sum  paid 
or  received  for  the  privilege  of  using  property 
for  a  defined  period  of  time. 


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Economics 

Stock  Companies. 

The  control  of  property  for  an  undefined 
period  of  time,  brings  in  the  condition  of 
stock  companies.  In  stock  companies  the 
stockholder  becomes  a  part  of  the  company 
and  is  entitled  to  participate  in  the  manage- 
ment of  the  affairs  of  the  company  and  to  vote 
at  the  election  of  officers.  The  bondholder 
simply  invests  in  the  bonds  of  the  company 
that  bear  a  stated  rate  of  interest.  The  bond- 
holder does  not  participate  in  the  business  af- 
fairs or  the  management  of  the  Company. 

There  is  a  difference  in  the  method  in  which 
stockholders  and  bondholders  receive  their 
pay.  A  f ter  all  interest  on  bonds  and  other 
expenses  of  the  company  have  been  paid, 
whatever  surplus  remains  is  paid  to  the  stock- 
holders in  the  form  of  dividends.  If  there  is 
no  surplus,  the  stockholders  receive  no  divi- 
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Economics 

(lends.  In  case  the  interest  on  bonds  and  the 
expenses  of  the  Company  are  greater  than  the 
income  of  the  Company,  the  stockholders  may 
meet  the  deficit  by  paying  an  additional  sum 
called  an  assessment,  or  they  may  allow  the 
affairs  of  the  company  to  be  closed  out. 

The  stockholders  must  pay  the  interest  on 
the  bonds  even  though  they  must  borrow  the 
money  to  do  so.  If  interest  on  bonds  is  not 
paid  the  bondholders  may  close  the  affairs  of 
the  company.  In  foreclosure  proceedings  the 
bondholders  are  paid  first.  Whatever  is  left 
is  paid  to  the  stockholders. 

Generally  stock  companies  will  come  under 
one  of  three  conditions.  Mining  companies, 
transportation  companies,  and  manufacturing 
companies.  Mining  properties  are  only  valu- 
able so  long  as  the  mineral  or  metal  lasts. 
After  the  mineral  or  metal  is  exhausted  the 

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property  is  worthless.  Hence,  all  stocks  and 
bonds  of  the  company  are  worthless.  Where 
valuable  bodies  of  metal  or  mineral  are  en- 
countered, small  investments  may  yield  large 
returns.  If  no  metal  or  mineral  is  encount- 
ered, large  investments  may  yield  no  returns. 

Transportation  companies  remain  in  opera- 
tion continuously  for  indefinite  periods  of 
time;  hence  their  securities  furnish  long  time 
investments. 

Manufacturing  conditions  are  governed 
more  or  less  by  local  and  national  affairs. 
Hence,  manufacturing  securities  are  more  or 
less  erratic.  Under  certain  conditions,  they 
may  yield  large  returns,  while  under  other 
conditions,  they  may  yield  no  returns.  During 
prosperous  seasons,  mills  may  run  day  and 
night,  while  during  panics,  the  mills  may  re- 
main idle  for  indefinite  periods  of  time. 

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Many  municipal  improvements  are  made  by 
means  of  bond  issues.  The  life  of  the  average 
brick  pavement  or  terra  cotta  pipe  sewer  is 
about  twenty  years.  The  life  of  the  average 
macadam  road  is  about  five  years.  Improve- 
ments that  are  made  by  means  of  bond  issues, 
and  the  improvements  wear  out  before  the 
bonds  mature,  form  a  class  of  investments 
that  will  cause  trouble  for  some  one. 

Under  existing  conditions,  the  finances  are 
conducted  largely  through  the  banks.  Since 
transportation  companies  are  constantly  mov- 
ing, all  transportation  must  be  in  cash.  Un- 
less there  are  adequate  banking  facilities  at 
the  source  and  mouth  of  navigable  rivers 
the  water  transportation  may  be  affected,  to 
such  an  extent,  as  to  affect  all  the  industries 
along  the  river. 


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CHAPTER  XL 
Intellectual  Investments. 

Almost  three  thousand  years  ago  King  Sol- 
omon wrote  the  words : —  "As  a  man  thinketh 
in  his  heart,  so  is  he".  If  we  go  back  to  Geol- 
ogy, which  is  the  history  of  the  earth  written 
in  the  rocks,  we  find  that  the  fish  were  the  first 
animals  to  appear  upon  the  earth.  Observa- 
tion shows  that  nature  placed  but  one  require- 
ment upon  the  fish : —  that  of  procuring  food. 
According  to  Geology,  the  next  animals  to 
appear  upon  the  earth  were  the  birds  and 
four  footed  beasts.  Observation  shows  that 
nature  placed  but  two  requirements  upon 
these  animals,  that  of  procuring  food  and 
shelter.    Horses,  cattle  and  birds  are  not  re- 

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Economics 

quired  to  provide  clothes  for  themselves.  Ac- 
cording to  the  same  rocky  history,  man  was 
the  last  of  the  animal  kingdom  to  appear  upon 
the  earth.  Observation  shows  that  nature 
placed  three  requirements  upon  man.  In  or- 
der to  live  man  must  have  food ;  he  must  have 
shelter;  and  he  must  have  clothing.  Going 
back  to  Primative  man,  his  shelter  may  have 
been  a  cave  in  the  rocks,  and  his  food,  may 
have  been  fruit  from  the  trees.  Later  he 
clothed  himself. 

At  this  point  it  is  necessary  to  note  a  dis- 
tinct revision  of  mental  processes.  When  he 
wanted  food  or  shelter,  the  idea  originated 
from  without  and  he  sought  it.  When  he 
wanted  clothing,  the  idea  originated  in  his 
own  brain  and  it  was  necessary  to  execute  it 
with  his  hand.  The  dress  of  primitive  man 
was  undoubtedly  crude.    In  some  cases  it  may 

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Economics 

have  been  leaves  from  trees  or  skins  from 
animals.  Yet,  it  conveys  the  idea  of  invention 
and  that  man  must  use  his  brain  to  supply  part 
of  his  needs. 

If  we  read  our  history  carefully,  we  see 
that  for  many  centuries  man  has  distinguished 
between  the  three  conditions  of  necessities, 
conveniences  and  luxuries.  Necessities,  we 
will  understand  to  mean  the  elements  neces- 
sary to  sustain  life.  Conveniences,  we  will 
understand  to  mean  the  elements  that  help 
to  sustain  life.  Luxuries,  we  will  under- 
stand as  conditions  that  may  be  desired  yet 
are  neither  necessary  nor  convenient. 

History  shows  conclusively  that  man's  oc- 
cupation has  always  exerted  a  marked  in- 
fluence on  his  intellect.  The  true  hunter  be- 
comes as  shy  and  as  diffident  as  the  game  that 
he    seeks    to    capture.     The    school    of    the 

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Economics 

hunter,  is  to  learn  to  distinguish  the  animal 
or  bird  from  its  foot  print,  track,  or  sound  of 
its  voice.  His  college  is  the  mountain,  the 
valley,  the  plain  and  the  stream.  His  univer- 
sity is  the  universe.  To  the  man  who  must 
procure  his  livelihood  by  means  of  hunting, 
book  learning  is  a  luxury. 

When  man  domesticated  the  animals,  so 
that  it  was  no  longer  necessary  for  him  to 
hunt  them,  in  order  to  procure  a  livelihood, 
we  find  his  shyness  and  diffidence  disappear- 
ing. The  semi-civilized  man  had  more  leisure 
and  became  broader  in  his  ideas.  To  him, 
book  learning  was  a  convenience.  Following 
our  history  a  step  farther,  we  see  that  in  or- 
der to  obtain  a  livelihood,  man  was  compelled 
to  enter  into  complicated  and  involved  busi- 
ness transactions.  In  order  to  assist  him  in 
his  business,  book-learning  became  a  necessity. 

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Economics 

A  child  born  into  the  world  knows  no  more 
about  the  conditions  of  the  world  than  did 
primitive  man.  It  is  only  by  means  of  educa- 
tion that  the  average  child  ever  becomes  able 
to  cope  with  modern  conditions.  Since  there 
is  much  to  learn  and  the  time  limited,  is  it 
economical  for  the  student  to  spend  years  in 
studying  languages  that  the  world  has  long 
since  discarded?  Is  it  economical  for  the 
student  to  spend  too  much  time  in  research 
work?  After  leaving  High  School,  is  it 
economical  for  a  student  to  continue  at  school 
unless  he  has  a  definite  aim  in  view?  Is  it 
economical  to  use  mechanical  calculating  de- 
vices? It  has  been  proven,  that  automatic 
machinery  creates  careless  and  incompetent 
workmen.  Might  not  mechanical  calculating 
devices  create  careless  and  incompetent  busi- 
ness men?    Many  of  these  devices  are  ingen- 

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Economics 

ious  and  the  results  obtained  are  marvelous. 
Among  engineers  the  slide  rule  is  extensively 
used.  While  the  slide  rule  is  simply  an  in- 
genious plaything  when  placed  in  the  hands  of 
competent  experienced  men  it  does  produce 
correct  results. 

The  student  will  readily  see  that  great 
changes  have  taken  place  in  the  world,  and 
that  many  of  these  changes  did  not  result  for 
the  betterment  of  humanity.  These  changes 
must  be  the  effect  of  some  cause.  Rum  was 
the  curse  of  the  savage  hunter.  It  destroyed 
the  tissue  of  his  body  so  that  he  was  no  longer 
able  to  follow  the  game,  which  in  many  cases, 
constituted  his  only  food  supply.  Machinery 
was  the  curse  of  the  semi-civilized  man.  With 
the  aid  of  machinery,  the  natural  feeding 
grounds  were  broken  up,  and  the  stock  had 
nothing  upon  which  to  subsist.    Charity  is  the 

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Economics 

curse  of  the  civilized  man.  Charity  supplies 
many  necessities  that  the  average  person 
should  learn  to  supply  for  themselves.  Hence, 
the  brain  has  no  chance  to  develop.  The  indi- 
vidual is  unable  to  cope  with  the  intellectual 
conditions  of  a  legitimate  business,  hence  he 
turns  to  crime  and  then  to  war.  It  was  char- 
ity that  gave  the  drunkard  his  cup,  it  was 
charity  that  gave  the  beggar  his  bread,  it  was 
charity  that  set  the  nations  of  the  world  at 
war  with  each  other. 


lis 


PART  III. 

Social   Conditions 


CHAPTER  XII. 

Governments,  Their  Origin  and 
Functions. 
Following  the  Economic  Table,  as  previ- 
ously outlined,  we  see  that  occupations  oc- 
curring in  the  different  economic  laws  produce 
different  intellectual  developments.  While  the 
school  of  the  hunter  consisted  in  being  able  to 
distinguish  the  animal  by  means  of  its  foot 
print  or  track,  the  work  of  the  hunter  was 
to  follow  this  track.  If  the  hunter  lost  the 
track  he  lost  his  chance  of  capturing  the  ani- 
mal in  its  lair,  or  on  its  feeding  ground.  Fol- 
lowing to  the  commercial  branch.  A  chain  is 
no  stronger  than  its  weakest  link.  Hence,  a 
blacksmith  makes  a  chain  and  if  the  chain  is 

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Economics 

to  be  valuable  each  link  must  be  equally 
strong.  Following  the  same  law  to  the  finan- 
cial branch,  the  guard  must  guard  all  the  prop- 
erty placed  under  his  care  and  the  messenger 
must  deliver  all  messages  entrusted  to  his 
keeping,  otherwise  their  services  are  valueless. 
Following  the  same  law  to  the  intellectual 
branch,  the  bookkeeper  must  place  every 
figure  in  its  proper  place  and  count  every 
figure  according  to  its  exact  value,  otherwise 
his  work  is  valueless. 

Following  the  Economic  Table  through  the 
second  law,  we  see  that  the  stock  raiser  was 
compelled  to  follow  his  flocks  and  herds.  The 
railroad  man  travels  back  and  forth,  like  a 
shuttle,  the  banker  takes  up  his  daily  routine ; 
and  the  most  difficult  task  in  teaching  is  to 
keep  from  getting  into  a  mental  rut. 

Following  the  Economic  Table  through  the 

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Economics 

third  law,  we  see  that, no  farmer  ever  planted 
two  crops  where  the  conditions  were  exactly 
the  same.  No  Architect  ever  designed  two 
buildings  that  were  exactly  alike  in  every  de- 
tail. No  financier  ever  made  two  investments 
where  the  conditions  were  exactly  the  same. 
No  doctor  or  lawyer  ever  had  two  cases  that 
were  exactly  alike.  Each  condition  is  differ- 
ent, and  so  widely  different,  that  each  task 
becomes  a  separate  problem. 

Lawyers,  doctors,  ministers,  financiers,  and 
architects  are  known  as  professional  people. 
The  question  then  arises, —  what  constitutes 
a  professional  person?  Going  back  to  the 
Economic  Table,  as  a  guide,  we  see  that  people 
working  in  the  first  law  were  compelled  to 
train  their  minds  so  as  not  to  miss  anything. 
The  hunter  must  find  every  track,  the  black- 
smith must  make  every  link  equally  strong,  the 

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Economics 

bookkeeper  must  place  every  figure  in  its  cor- 
rect place  and  count  it  for  its  exact  value. 

Following  the  same  Economic  guide,  we  see 
that  people  working  in  the  second  law  must 
train  their  minds  to  work  in  an  orbit.  The 
stock  raiser  was  compelled  to  follow  his  herds, 
although  they  may  have  led  him  over  the  same 
territory,  day  after  day.  The  railroad  man 
travels  back  and  forth  over  the  same  section 
day  after  day.  Hence,  he  must  train  his  mind 
to  perform  practically  the  same  daily  duties. 
Likewise  the  banker  must  train  his  mind  in 
more  or  less  of  a  daily  routine.  While,  the 
teacher  begins  at  certain  intellectual  points 
and  advances  to  certain  other  intellectual 
points,  during  the  term,  and  then  performs 
practically  the  same  duties  for  each  succeed- 
ing term. 

With   the  professional   person,   since   each 

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Economics 

task  is  different,  he  has  no  previous  or  routine 
duties  to  assist  or  guide  him.  His  only  method 
is  to  follow  his  task  step  by  step,  as  an  en- 
gineer follows  his  grade  line  from  the  valley 
to  the  summit  of  the  mountain.  Hence,  his 
mind  must  be  trained  accordingly.  It  is  gen- 
erally conceded  that  persons  who  write  letters 
after  their  names  are  professional  persons. 
In  most  cases  letters,  written  after  the  name, 
signifies,  that  at  some  time  the  person  com- 
pleted a  course  of  study  at  some  one  of  the 
higher  institutions  of  learning.  These  persons 
may  or  may  not  be  able  to  follow  a  compli- 
cated problem  step  by  step,  hence  it  is  neces- 
sary to  define  professional  persons. 

Professional  persons  are  persons  who  use 
their  brain  to  assist  them  in  their  everyday 
tasks.  We  must  not  jump  to  the  conclusion 
that  since  every  person  has  a  brain  and  a  daily 

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Economics 

task,  that  every  person  is  professional.  About 
one-tenth  of  one  per  cent  of  the  people  seem 
to  use  their  brain  to  assist  them  in  their  every- 
day tasks,  the  other  ninety-nine  and  nine- 
tenths  per  cent  seem  to  use  their  brain  to  re- 
tard them  in  their  every  day  tasks.  It  is  the 
hope  of  the  writer,  that  every  person  will  hon- 
estly believe  that  they  belong  to  that  favored 
one-tenth  per  cent. 

When  man  began  to  till  the  soil  he  met  a 
natural  condition  that  of  the  duration  of  time 
between  seed  time  and  harvest.  This  duration 
is  any  where  from  three  to  ten  months  and 
during  this  period,  if  the  crops  are  to  mature, 
the  plants  dare  not  be  disturbed.  Hence,  the 
growing  plants  had  to  be  protected.  In  peace- 
ful times,  one  person  could  protect  vast  areas 
and,  when  assistance  was  needed,  inform 
other  persons  in  the  immediate  vicinity.    For 

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Economics 

this  service,  the  watchers  could  be  paid  a  por- 
tion of  the  crop.  Banding  these  watchers  to- 
gether, into  an  organization,  would  form  a 
government  and  paying  a  portion  of  the  crops 
would  form  taxation.  Hence,  the  first  use  of 
governments  is  protection  and  the  principal 
use  of  taxation  is  to  support  the  government. 
After  the  crops  were  harvested  and  ready 
for  market  the  early  farmers  met  with  another 
difficulty.  A.  might  prepare  a  portion  of 
grain  for  market,  but  the  grain  might  not 
actually  be  consumed  until  it  reached  E.,  F.,  G. 
or  H.  as  the  case  might  be.  If  each  person 
through  whose  hands  this  grain  passed  had 
his  own  system  of  measuring,  it  would  lead  to 
endless  confusion.  This  confusion  was  over- 
come by  the  government  establishing  a  system 
of  weights  and  measures  to  be  used  in  con- 
ducting all  commercial  transactions.     Hence, 

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Economics 

the  second  function  of  government,  is  regula- 
tion. From  this,  we  can  draw  the  conclusion 
that  governments  are  necessary  in  order  to 
protect  and  regulate  the  workings  of  civilized 
man. 

By  going  back  to  the  Economic  Table,  we 
see  that  it  was  necessary  for  the  hunter  to 
protect  himself  and  he  needed  no  regulation  in 
dividing  his  game.  Hence,  he  needed  no 
government.  "Might  was  right."  That  was 
the  law  and  government  of  the  savage. 

With  the  semi-civilized  man,  it  was  con- 
venient for  several  families  to  work  together 
and  divide  the  product  of  their  flocks  and 
herds.  As  an  illustration,  take  a  valley  twenty 
miles  long  with  five  places  of  exit.  Five  fam- 
ilies working  together,  one  family  at  each  exit, 
could  control  the  entire  valley.  Since  the 
exits  were  guarded  the  flocks  and  herds  could 

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Economics 

roam  up  and  down  the  valley.  In  order  for 
the  families  to  subsist  it  would  be  necessary 
to  divide  the  product  of  the  flocks  and  herds. 
It  was  not  until  man  began  to  till  the  soil  and 
dispose  of  the  products  of  the  earth,  that  he 
needed  the  protection  and  regulation  of  a 
government. 

Again  following  the  Economic  Table,  taking 
the  first  law  through  its  various  branches.  It 
was  shown  that  the  hunter  required  no  govern- 
ment. The  blacksmith  welded  his  chain  by 
using  the  muscles  of  his  arm  or  by  manipulat- 
ing a  machine.  The  guard  must  be  a  govern- 
ment unto  himself  while  all  the  governments 
that  ever  existed  could  not  add  a  column  of 
figures. 

Following  the  second  law  through  its  vari- 
ous branches,  the  stock  raiser,  the  railroad 
man,  the  banker  and  the  teacher,  can  all  be 

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Economics 

assisted  with  the  aid  of  government.  Yet,  the 
stock  raiser  might  be  called  upon  to  turn  his 
herd  single  handed  and  alone,  in  order  that 
they  may  not  escape  from  him.  The  railroad 
man  must  solve  many  difficult  problems,  un- 
aided and  alone.  In  many  cases,  the  banker 
has  no  one  to  assist  him  in  guarding  the  prop- 
erty under  his  care.  While,  every  teacher 
knows  that  any  school  may  be  a  little  world 
of  its  own. 

The  farmer  needed  the  protection  and  reg- 
ulation of  a  government  when  he  began  to  till 
the  soil.  The  architect,  the  lawyer,  and  the 
doctor  needed  the  protection  and  regulation 
of  a  government  when  they  began  to  charge 
for  their  services.  The  financier  needed  the 
protection  and  regulation  of  a  government 
when  he  arranged  his  investments  so  that  they 
yielded  him  an  income.    Hence,  we  can  draw 

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Economics 

the  conclusion,  that  civilized  man  needs  gov- 
ernment protection  and  regulation  when  he 
places  professional  work  on  a  icommercial 
basis. 

As  the  world  advances  it  draws  farther  and 
farther  away  from  the  law  of  material.  That 
is,  the  material  in  the  mine  and  in  the  forests 
is  constantly  decreasing.  In  order  to  subsist, 
the  world  must  turn  more  and  more  to  pro- 
ducts gained  by  invention,  which  is  mostly 
professional  work.  Hence,  it  is  necessary  to 
bring  our  daily  affairs  more  and  more  under 
the  control  and  regulation  of  the  govern- 
ment. 

As  previously  shown,  taxation  is  a  sum 
collected  for  the  support  of  governments. 
Under  existing  conditions,  taxation  has  be- 
come  quite   complicated.      It   is   also   closely 


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Economics 

allied  with  tariff.  These  two  conditions  will 
be  treated  separately. 

As  previously  shown,  the  second  function 
of  government  is  to  regulate.  This  has  been 
accomplished  by  the  government  establishing 
standards.  Different  governments  use  differ- 
ent amounts  but  in  principle  all  standards  are 
the  same.  The  question  uppermost  in  the 
mind  of  every  person  today  is:  the  high  cost 
of  living.  Practically,  the  high  cost  of  living 
is  due  to  the  fact  that  the  government  has  out- 
grown its  present  system  of  weights  and  meas- 
ures. That  is,  with  its  present  system  of 
weights  and  measures  the  government  is  no 
longer  able  to  regulate  commercial  conditions. 

The  only  form  of  business,  that  seems  to 
promise  any  relief,  is  the  commission  form  of 
business.  But,  before  the  commission  form  of 
business  is  possible  it  will  be  necessary  for  the 

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Economics 

government  to  extend  our  present  system  of 
weights  and  measures.  That  is,  in  the  com- 
mission form  of  business  everything  must  be 
bought  and  sold  according  to  standards  set  by 
the  National  Government.  It  would  be  neces- 
sary to  extend  our  present  system  of  weights 
and  measures  so  as  to  cover  all  fruits,  nuts, 
vegetables,  grains  and  meats.  In  the  case  of 
manufactured  articles,  in  many  cases,  the 
manufacturer  must  meet  conditions  that  it 
would  be  difficult  and  costly  to  standardize. 
To  add  to  their  beauty  and  usefulness,  all 
manufactured  goods  are  colored  or  painted. 
The  consumer  is  not  interested  in  the  method 
of  manufacture.  All  the  consumer  cares  to 
know  is,  that  the  goods  are,  what  the  manu- 
facturer says  they  are.  That  is,  if  A.  is  a 
shoe  manufacturer  and  offers  a  shoe  for  sale 
that  he  marks  as  being  all  leather,  the  shoe 

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Economics 

must  be  all  leather.  At  the  same  time  he  may 
be  making  shoes  that  are  part  paper  or  shoes 
that  are  canvas.  If  B.  is  a  cloth  manufacturer 
and  manufacturers  a  piece  of  cloth  that  he 
marks  as  being  all  wool,  the  cloth  must  be  all 
wool.  At  the  same  time  B.  may  be  manufac- 
turing cloth  that  is  part  wool  and  part  cotton 
or  cloth  that  is  all  cotton.  But,  if  A.'s  shoes, 
that  he  has  marked  as  being  all  leather,  are 
found  to  be  part  paper,  or  B.'s  cloth,  that  he 
has  marked  as  being  all  wool,  is  found  to  be 
part  cotton,  both  A.  and  B.  are  liable  to 
government  prosecution  and  to  such  punish- 
ment as  the  government  sees  fit  to  mete  out  to 
them. 

In  order  that  the  commission  form  of  busi- 
ness may  be  conducted  successfully,  all  busi- 
ness must  originate  with  the  consumer.  The 
consumers  order  from  the  commission  man 

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what  they  want  and  the  commission  man  gets 
it  for  them.  It  is  simply  quick  sales  and  small 
profits.  Every  merchant  knows,  that  is  his 
most  profitable  business.  In  the  commission 
form  of  business,  since  it  is  the  duty  of  the 
government  to  protect  and  regulate,  it  would 
be  necessary  for  the  government  to  control  all 
places  where  grain  or  food  is  stored.  This 
would  mean  all  grain  elevators  and  cold  stor- 
age plants. 

There  is  no  denying  the  fact  that  the  farm- 
ers work  hard  for  the  products  that  the  earth 
gives  them.  But,  does  not  the  mill  man  work 
just  as  hard  to  produce  machines  for  the 
farmers  to  use?  If  it  is  necessary  for  the 
government  to  protect  and  regulate  conditions 
for  the  farmer,  is  it  not  just  as  necessary  that 
the  government  protect  and  regulate  condi- 
tions for  the  wage  earner  ? 

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CHAPTER  XIII. 

Taxation. 

As  previously  stated,  taxation  is  a  sum 
charged  or  collected  for  the  support  of  gov- 
ernment. As  previously  shown  man's  wants 
are  luxuries,  conveniences  and  necessities, 
hence,  his  taxes  must  be  arranged  accordingly. 
During  prosperous  times,  luxuries  will  yield 
a  certain  amount  of  taxation.  That  is,  peo- 
ple desire  many  things  that  are  neither  con- 
venient or  necessary  and  when  they  can  af- 
ford it,  financially,  the  people  will  purchase 
these  articles.  But,  during  times  of  depres- 
sion, the  use  of  luxuries  decreases.  If  the  de- 
pression is  long  and  severe,  the  use  of  lux- 

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Economics 

uries  may  entirely  cease,  hence,  all  taxation 
from  luxuries  would  cease.  From  this,  we 
see  that  the  first  condition  in  taxation  is: — 
that  luxuries  cannot  be  depended  upon  to 
yield  taxation. 

The  conditions  that  are  true  of  luxuries  are 
likewise  true  of  conveniences.  In  times  of 
depression,  people  deprive  themselves  of  many 
conveniences.  Hence,  the  amounts  received 
from  the  sale  of  conveniences  decrease  and  the 
amount  of  taxation  will  likewise  decrease. 
The  second  condition  in  taxation  is : — That 
the  amount  of  taxation  derived  from  conveni- 
ences will  decrease  during  times  of  depres- 
sion. The  conditions  that  are  true  in  regard 
to  conveniences  are  likewise  true  in  regard  to 
incomes  and  salaries.  In  times  of  depression, 
all  incomes  and  salaries  decrease  and  many 
incomes  and  salaries  entirely  cease.     Hence, 

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Economics 

in  times  of  depression,  the  amount  of  tax  de- 
rived from  incomes  and  salaries  must  like- 
wise decrease. 

The  third  condition  in  taxation  is: — that 
during  times  of  depression,  in  order  to  sup- 
port itself,  the  government  must  depend 
largely  or  entirely  upon  taxation  derived  from 
necessities.  In  many  cases,  it  is  necessary  to 
determine  the  use  of  an  article  before  it  is 
possible  to  determine  whether  it  is  a  luxury, 
a  convenience  or  a  necessity.  The  average 
farm  horse  may  be  a  necessity,  a  convenience 
or  a  luxury,  depending  entirely  upon  how  the 
horse  is  used.  If  the  horse  is  used  to  drag 
the  farm  implements,  in  cultivating  the  soil, 
or  to  draw  the  crops  to  market,  the  horse  is  a 
necessity.  If  the  owner  wishes  to  go  to  a 
neighbor's  house,  a  mile  away,  and  rides  the 
horse  in  preference  to  walking,  the  horse  is  a 

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Economics 

convenience.  If  the  horse  is  hitched  to  a 
pleasure  vehicle  and  driven  for  pleasure,  the 
horse  is  a  luxury. 

Taking  another  illustration,  A.,  B.  and  C. 
each  owns  an  automobile.  A.  uses  his  auto- 
mobile entirely  for  pleasure.  B.  uses  his  auto- 
mobile to  travel  back  and  forth  to  his  office, 
when  he  might  use  a  street  car.  C.  uses  his 
automobile  to  take  goods  to  his  customers  or 
material  to  his  workmen.  A.'s  automobile  is 
a  luxury,  B.'s  automobile  is  a  convenience, 
and  C.'s  automobile  is  a  necessity. 

Nearly  all  articles  conform  to  the  same  con- 
ditions. Hence,  we  can  readily  see  that  it 
depends  very  largely  upon  how  an  article  is 
used  as  to  whether  that  article  is  a  luxury,  a 
convenience  or  a  necessity.  To  carry  the  il- 
lustration of  A.,  B.  and  C.  a  step  farther.  In 
times  of  depression,  A.  can  advance  many  rea- 

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Economics 

sons  why  he  should  no  longer  own  an  auto- 
mobile. His  desires  for  automobiles  may 
have  been  satisfied.  His  friends  and  associ- 
ates may  no  longer  have  automobiles.  The 
roads  may  have  been  allowed  to  deteriorate 
so  that  there  is  no  longer  any  pleasure  in  driv- 
ing an  automobile.  He  could  advance  any 
number  of  reasons  why  he  should  not  keep  an 
automobile,  but,  the  fact  is  he  does  not  keep 
an  automobile  so  the  government  has  no 
chance  to  tax  him  for  keeping  an  automobile. 
In  the  case  of  B.,  business  depressions  may 
develop  many  reasons  why  he  should  econo- 
mize. He  finds  that  it  costs  about  five  cents 
per  mile  to  ride  in  an  automobile  and  about 
one  cent  per  mile  to  ride  in  a  street  car.  He 
denies  himself  the  convenience  of  riding  in  an 
automobile.  He  rides  in  a  street  car  and 
saves  the  difference  between  the  automobile 

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Economics 

fare  and  the  street  car  fare.  But,  he  no 
longer  owns  an  automobile,  so  there  is  no 
longer  any  chance  to  tax  him  for  owning  an 
automobile.  C.'s  automobile  is  part  of  his 
business,  hence,  he  is  compelled  to  keep  it. 
Consequently,  the  government  has  a  chance  to 
tax  him  for  keeping  it.  Since  the  government 
is  compelled  to  depend  upon  necessities  for 
its  tax  or  revenue,  it  is  to  the  interest  of  the 
government  to  arrange  necessities  so  that  they 
will  yield  the  largest  possible  amount  of  taxa- 
tion. 

If  we  wish  to  understand  the  principles  of 
taxation  it  will  be  necessary  to  adhere  closely 
to  conditions.  The  earth,  man  and  many  other 
conditions  existed  before  governments  became 
necessary.  Since  the  function  of  the  govern- 
ment is  to  protect  and  regulate,  logically,  the 
government  only  should  tax  those  conditions 

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Economics 

that  require  government  protection  and  regu- 
lation. 

Taxation  of  Mining  Companies: — In  their 
natural  condition,  hid  in  the  earth,  minerals  re- 
quire neither  government  protection  nor  gov- 
ernment regulation.  Hence,  minerals  should 
not  be  taxed  for  the  support  of  governments. 
Mining  companies  do  require  the  protection 
and  regulation  of  governments,  hence,  mining 
companies  should  be  taxed  for  the  support  of 
governments.  The  question  then  arises,  how 
should  mining  companies  be  taxed?  Minerals 
may  be  taxed  by  using  either  one  of  three 
methods.  They  may  be  taxed  on  an  acreage 
basis;  they  may  be  taxed  on  a  tonnage  basis, 
or  they  may  be  taxed  on  a  valuation  basis.  As 
previously  shown,  minerals  yield  no  return 
until  the  time  of  mining.  At  the  time  of  min- 
ing, the  profit  must  be  sufficient  to  pay  all 

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Economics 

previous  expenses.  If  taxed  on  an  acreage 
basis,  the  same  area  may  be  taxed  year  after 
year  but  since  the  mineral  can  yield  no  return 
until  the  time  of  mining,  the  tax  must  simply 
accumulate.  That  is,  taxing  on  an  acreage 
basis,  is  simply  creating  a  debt  that  future 
generations  must  pay.  If  the  time  of  mining 
is  far  distant,  the  accumulated  debt,  that  must 
be  obliterated  by  a  profit  at  the  time  of  mining, 
may  be  so  great  that  the  minerals  cannot  be 
used  for  commercial  purposes.  If  the  com- 
panies are  taxed  on  a  tonnage  or  valuation 
basis  there  is  no  tax  due  until  the  mineral  is 
mined.  At  the  time  of  mining,  a  certain  sum 
is  charged  for  taxation  which  in  reality  be- 
comes a  part  of  the  cost  of  production.  All 
the  facts  point  to  the  logical  conclusion,  that 
mining  companies  should  be  taxed  on  a  ton- 
nage or  valuation  basis  and  not  on  an  acreage 

basis. 

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Economics 

Valuation  of  Property: — The  valuation  of 
property  can  always  be  determined,  either 
from  what  the  property  will  produce,  from 
what  the  property  will  yield,  or  from  what  the 
property  will  earn.  The  produce  or  earning 
power  of  the  property  can  be  converted  into 
cash.  After  deducting  all  necessary  expenses, 
the  balance  represents  the  interest  on  the  val- 
uation. There  is  an  exception  to  this  in  the 
case  of  mineral  lands.  This  exception  has 
been  previously  explained. 

Ownership. 

Economically,  we  must  recognize  two  classes 
of  ownership;  absolute  ownership  and  condi- 
tional ownership.  The  merchant  buys  and 
sells  but  he  buys  and  sells  absolutely.  That  is, 
when  a  merchant  buys  goods,  the  goods  be- 
long to  him  and  he  may  do  absolutely  as  he 

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Economics 

pleases  with  them.  He  may  sell  them,  he  may 
give  them  away,  he  may  consume  them,  or,  he 
may  destroy  them.  No  person  has  any  right 
to  question  the  disposition  that  he  makes  of 
his  own  goods.  The  real  estate  man  buys  and 
sells  property,  but  he  always  buys  and  sells 
conditionally.  That  is,  all  property  is  bought 
and  sold  subject  to  taxation  and  taxation  is 
imposed  on  all  property  for  the  support  of  the 
government.  Thus,  for  the  purpose  of  taxa- 
tion, the  government  must  know  the  valuation 
of  all  property. 

Different  governments  have  used  different 
methods  to  determine  the  valuation  of  prop- 
erty. One  method  is  for  government  officials 
to  place  valuations  on  all  property  for  the  pur- 
pose of  taxation.  This  is  neither  a  small  nor 
a  pleasant  task,  as  property  owners  are  con- 
tinually appealing  to  the  courts  for  adjust- 

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Economics 

ment  of  valuation.  The  method  has  likewise 
brought  abandoned  farms  in  the  country  and 
slums  in  the  cities. 

In  the  country,  land  is  used  to  produce  farm 
products  while  in  the  cities  it  is  used  as  sites 
for  buildings.  This  necessitates  using  differ- 
ent methods  in  placing  valuations  on  country 
property  and  city  property.  Economically,  in 
the  country,  the  land  must  be  valued  in  pro- 
portion to  what  it  will  produce,  or  what  it  can 
be  made  to  produce.  In  the  city  the  land  must 
be  valued  in  proportion  to  what  it  will  earn  or 
what  it  can  be  made  to  earn.  Since  the  gov- 
ernment values  land  for  taxation  purposes, 
economically,  it  is  to  the  interest  of  the  gov- 
ernment to  make  country  land  produce  as 
much  as  possible,  and  to  make  the  city  land 
earn  as  much  as  possible. 

There  is  but  one  answer  to  the  cause  of 

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Economics 

abandoned  farms  in  the  country  and  slums 
in  the  cities,  that  is,  excessive  taxation.  It  is 
known  to  country  people,  that  hill  land  and 
mountain  land  will  not  produce  as  large  crops, 
using  an  equivalent  amount  of  labor,  as  river 
bottoms  will  produce.  Another  fact  that  is  not 
so  generally  known  is: —  that  land  in  some 
geological  formations  will  not  produce  as 
much  as  land  in  other  geological  formations, 
other  conditions  and  locations  being  similar. 
If  land  is  taxed  for  more  than  it  will  produce, 
it  is  taxed  excessively  and  the  farmer  must 
abandon  the  farm  either  by  moving  to  another 
locality  or  by  entering  other  lines  of  employ- 
ment. That  is,  if  it  takes  all  the  farmer  can 
raise  to  pay  the  taxes  on  the  farm  there  is 
nothing  left  to  compensate  the  farmer  for  his 
labor. 

Slums  in  cities  are  the  result  of  growth,  or 

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Economics 

rather  the  lack  of  growth.  At  some  period,  in 
the  history  of  the  city,  the  slum  district  was 
the  leading  part  of  the  city.  But,  this  may 
have  been  when  the  city  was  merely  a  country 
village.  Other  parts  of  the  city  grew,  but  the 
slums  remained  stationary.  In  many  cases, 
the  properties  pass  from  one  generation  to 
another  generation  by  inheritance.  The  in- 
come from  the  property  is  all  the  people  who 
own  the  property  have  to  live  upon.  A  half 
loaf  is  better  than  no  bread  and  the  income 
from  a  delapidated  property  is  better  than  no 
income. 

Since  the  government  values  land  for  taxa- 
tion purposes,  it  makes  no  difference  to  the 
government  who  owns  the  land  or  who  pays 
the  tax ;  as  long  as  the  land  is  yielding  or  earn- 
ing all  that  it  can  be  made  to  earn ;  thus,  yield- 
ing the  greatest  amount  of  taxation. 

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Economics 

Since  the  government  is  interested  only  in 
taxation  and  not  in  valuation,  some  govern- 
ments have  adopted  a  different  method  for  de- 
termining the  valuation  of  property.  Instead 
of  government  officials  determining  the  value 
of  properties,  each  property  owner  determines 
the  value  of  his  own  property.  The  govern- 
ment stipulates  that  he  must  sell  the  property, 
for  cash,  at  the  valuation  given  providing  any 
person  wishes  to  buy  the  property.  This  sys- 
tem will  permit  of  different  developments.  If 
the  property  is  sold,  at  the  stated  valuation,  it 
simply  means  a  transfer  of  ownership  and  the 
government  has  gained  nothing  in  the  way  of 
taxation.  But,  if  the  transfer  were  made  at 
valuation  given  plus  ten  per  cent  and  the  taxa- 
tion determined  on  the  new  valuation,  then  the 
government  would  have  cause  to  insist  on  the 
transfer. 

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Economics 

In  the  rural  districts,  this  method  would 
tend  to  keep  land  of  inferior  fertility  under 
cultivation,  for  the  land  would  be  taxed  ac- 
cording to  its  producing  value.  In  the  cities, 
the  method  would  tend  to  eliminate  the  slums. 
As  previously  stated,  slums  in  cities  are 
formed  by  a  lot  of  buildings  that  have  outlived 
their  usefulness.  In  nearly  every  case,  the 
buildings  are  owned  by  people  who  have  not 
the  means,  financially,  to  replace  the  present 
buildings  with  buildings  suitable  to  meet  pres- 
ent requirements.  In  addition,  the  slums  are 
usually  situated  in  the  most  valuable  part  of 
the  city. 

There  is  no  reason  why  valuable  city  prop- 
erty cannot  be  owned  and  controlled  by  cor- 
porations the  same  as  other  property  is  owned 
and  controlled  by  corporations.  In  many  slum 
districts,   it  might  be   necessary   to   combine 

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Economics 

several  properties  before  a  plot,  large  enough 
to  meet  the  requirements,  could  be  secured. 
Taking  the  valuation  of  these  properties  from 
the  government  records,  suitable  buildings 
could  be  arranged  to  make  the  slum  district 
the  most  valuable  part  of  the  city.  The  pres- 
ent owners  could  be  paid  in  cash  or  given  se- 
curities in  the  enterprise. 

Tariff: — A  tariff  may  be  considered  as  a 
financial  wall,  or  dam,  thrown  around  a  coun- 
try to  protect  its  industries,  during  a  certain 
stage  of  national  development.  Since  it  was 
necessary  for  primitive  man  to  live  from  the 
products  of  the  earth,  probably  the  first  class 
of  people  to  need  government  protection  and 
regulation  were  the  farmers.  The  farmer 
needs  many  articles  that  he  cannot  produce 
and  his  only  method,  is  either  to  buy  or  ex- 
change for  these  articles.    If  he  buys,  he  must 

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Economics 

likewise  sell,  otherwise  he  has  no  money  to 
pay  his  bills.  If  he  simply  exchanges,  he  has 
no  money  to  pay  his  taxes.  The  workings  of 
a  nation  are  similar  to  the  workings  of  an 
individual  except  that  they  are  conducted  on 
a  much  larger  scale.  In  the  early  stages  of 
its  development  a  nation  does  exchange  for 
many  articles  that  it  cannot  produce  but  it 
must  be  able  to  secure  a  certain  amount  of 
cash  in  order  to  meet  its  financial  obligations. 

During  the  early  stages  of  its  development, 
every  nation  has  been  compelled  to  borrow 
money  from  outside  sources.  If  it  simply  ex- 
changed articles  the  interest  on  borrowed 
capital  was  a  constant  drain  on  the  finances 
of  the  country. 

Closely  allied  with  the  finances  of  the  coun- 
try are,  the  manufacturing  interests.  The 
home  manufacturer  was   compelled  to   have 

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Economics 

plant  and  material  before  he  could  manufac- 
ture. These  articles  were  invariably  procured 
by  means  of  borrowed  capital.  The  home 
manufacturer  might  be  able  to  meet  the  for- 
eign manufacturer  on  an  exchange  basis.  But, 
it  was  necessary  for  the  home  manufacturer 
to  sell  a  certain  amount,  for  cash,  in  order  to 
be  able  to  meet  the  interest  on  his  borrowed 
capital.  Otherwise,  the  interest  on  his  bor- 
rowed capital  would  drive  him  out  of  business. 
What  the  home  manufacturer  needed  was  a 
condition  that  would  allow  him  to  sell  his 
manufactured  articles,  in  his  own  markets, 
for  less  than  the  foreign  manufacturer  could 
sell  similar  articles  and  at  the  same  time  allow 
the  home  manufacturer  sufficient  profit  so  that 
he  could  pay  the  interest  on  his  borrowed  cap- 
ital. This  condition  was  brought  about  by  the 
government    establishing   a    protective    tariff. 

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Economics 

Literally,  the  government  said  to  the  foreign 
manufacturer,  that  if  he  wanted  to  trade  in 
these  markets  it  would  be  necessary  for  him 
to  pay  the  government  a  certain  sum  for  the 
privilege.  This  sum  was  turned  into  the  na- 
tional treasury. 

At  this  point  it  will  be  necessary  for  us  to 
balance  our  books.  Interest  on  outstanding 
loans  is  against  the  country.  But,  the  coun- 
try is  using  its  own  manufactured  articles  to 
develop  its  own  resources,  and  selling  food 
products.  The  one  condition  practically  bal- 
ances the  other  condition.  A  country  can  de- 
velop, by  means  of  a  tariff,  so  long  as  these 
conditions  prevail.  But,  as  soon  as  a  nation 
becomes  a  lender  instead  of  a  borrower  or 
consumes  all  its  food  products  then  a  tariff 
becomes  a  detriment  instead  of  a  benefit. 

If  a  nation  lends  more  than  she  borrows  the 

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Economics 

amount  of  interest  she  receives  is  greater  than 
the  amount  of  interest  she  pays.  Consequent- 
ly the  nation  has  an  income  from  the  interest 
on  her  loans.  At  the  same  time  if  she  sells 
manufactured  products  and  food  supplies  the 
nation  is  in  a  position  to  dictate  her  own 
prices,  hence,  a  tariff  can  no  longer  protect. 

On  the  other  hand,  if  a  nation  must  pay 
interest  on  outstanding  loans  and  buy  food 
supplies  she  is  compelled  to  sell  manufactured 
articles  or  become  bankrupt.  A  tariff  will  in- 
crease the  price  of  her  manufactured  articles 
and  likewise  increase  the  cost  of  her  food  sup- 
plies. Increase  in  the  cost  of  manufactured 
articles  decreases  the  sales  and  increase  in  the 
cost  of  food  products  is  a  direct  increase  in 
expenditures.  Hence,  a  tariff  becomes  a 
detriment. 


Economics 


CHAPTER  XIV. 
Wage  Earners. 

The  world  has  produced  three  classes  of 
workmen;  the  freeman;  the  servant;  and  the 
slave.  The  freeman  controls  his  own  busi- 
ness affairs  and  is  compensated  by  the  direct 
returns  of  his  business.  The  servant  receives 
a  salary  and  in  return  for  the  salary  allows 
his  services  to  be  controlled  by  other  persons. 
The  services  of  the  slave  were  legally  con- 
trolled by  other  persons.  That  is,  slavery,  as 
it  existed,  was  nothing  more  than  one  class  of 
persons  legally  controlling  another  class  of 
persons.  For  many  years,  slavery  has  been 
abolished  by  all  civilized  nations,  so  that  today 
we  have  but  two  classes  of  workmen. 

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Economics 

The  freeman  is  allowed  to  control  his  own 
business,  but  his  compensation  varies.  As  an 
illustration,  "A"  begins  business  on  January 
first,  with  a  capital  of  One  Hundred  Dollars, 
and  remains  in  business  for  one  year.  At  the 
end  of  the  year,  he  is  in  either  one  of  three 
conditions.  He  has  more  capital  than  he  had 
when  he  began;  he  has  as  much  capital  as 
when  he  began ;  or,  he  has  less  capital  than 
he  had  when  he  began.  In  the  first  condition, 
suppose  at  the  end  of  the  year,  he  has  One 
Hundred  and  Fifty  Dollars.  Fifty  Dollars 
represents  the  pay  for  his  work.  In  the  sec- 
ond condition,  he  has  but  One  Hundred  Dol- 
lars; hence,  he  has  worked  for  nothing.  In 
the  third  condition,  suppose  he  has  Fifty  Dol- 
lars ;  he  has  not  only  worked  for  nothing,  but 
he  paid  Fifty  Dollars  for  the  privilege  of 
working. 

ISS 


Economics 

Before  power  was  applied  to  manufactur- 
ing, nearly  all  business  was  conducted  by  this 
method.  Today,  many  small  transactions  are 
conducted  according  to  the  same  principle. 
This  method  produced  the  condition  of  mas- 
ter and  servant,  and  gave  rise  to  the  appren- 
ticeship system.  In  the  apprenticeship  system, 
the  apprentice  was  to  serve  for  a  certain  pe- 
riod of  time.  At  the  end  of  that  time,  he  was 
supposed  to  be  a  master  workman.  History 
proves  that  the  system  did  produce  many  good 
workmen. 

When  power  was  applied  to  manufacturing 
and  corporations  were  formed,  a  new  condi- 
tion developed.  It  was  found  advisable  to  pay 
all  corporation  employees  a  salary.  By  using 
this  arrangement,  the  condition  of  master  and 
servant  disappeared  and  the  new  condition  of 
servant  dealing  with  servant  developed. 

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Economics 

The  Instruction  of  Workmen. 

In  the  case  of  master  and  apprentice,  the 
master  was  the  instructor.  In  the  case  of  cor- 
porations, if  each  employee  is  allowed  to  de- 
velop his  own  method  in  his  own  way,  it  will 
lead  to  endless  confusion  and  very  little  actual 
work.  If  the  world  is  to  advance,  it  must  be- 
gin in  the  morning  where  it  left  off  the  night 
before.  This  would  imply  continual  instruc- 
tion on  the  part  of  the  younger  workmen. 
Since  there  is  no  one  else  to  furnish  this  in- 
struction it  will  be  necessary  for  the  corpora- 
tion to  furnish  it.  It  might  add  to  the  useful- 
ness of  the  method,  if  the  younger  workmen 
were  charged  something  for  instructions. 

The  Protection  of  Workmen: — In  the 
training  of  large  bodies  of  men,  the  old  time 
apprenticeship  system  has  proven  itself  to  be 
defective.     Conditions  have  arisen  where  all 

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Economics 

interests  concerned  need  government  protec- 
tion and  government  regulation. 

In  order  to  perform  the  tasks  required  of 
them,  some  employees  must  be  given  legal 
powers  that  are  denied  to  other  employees. 
The  duties  of  the  foreman  is  to  direct  the 
work.  In  order  to  properly  direct  the  work,  he 
must  be  able  to  control  the  working  forces.  The 
using  of  brute  force,  in  controlling  workmen, 
is  a  condition  of  the  past.  The  foreman  is  a 
part  of  the  corporation  and  the  corporation  is 
a  part  of  the  government.  Hence,  if  the  fore- 
man needs  assistance,  the  logical  place  for  ob- 
taining this  assistance  is  from  the  government. 
From  this  we  see,  that  since  it  is  necessary  for 
the  foreman  to  invoke  the  aid  of  the  govern- 
ment it  is  likewise  the  duty  of  the  government 
to  provide  the  foreman  with  a  legal  method  of 
discharge. 

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Economics 

The  mails  and  the  telegraph  are  extensively 
used  in  many  business  transactions.  This 
places  many  business  affairs  into  the  hands  of 
disinterested  people.  Not  saying  that  these 
people  are  careless,  negligent,  or  incompetent, 
but  merely  that  they  are  disinterested.  The 
address  is  wrong  on  an  important  letter  or  a 
missent  telegram  leads  to  complications.  In- 
variably these  complications  first  manifest 
themselves  among  the  working  force.  The 
workmen  get  blamed  and  in  many  cases  dis- 
charged. In  order  to  protect  the  workmen 
from  injustice,  it  is  likewise  necessary  for  the 
government  to  provide  the  workman  with  a 
legal  right  to  a  hearing.  After  all  interested 
parties  have  had  a  legal  hearing,  if  it  is  shown 
that  the  workman  is  incompetent,  either  physi- 
cally, commercially  or  intellectually,  to  per- 
form the  tasks  required  of  him,  it  is  to  the  in- 

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Economics 

terests  of  all  parties  concerned  that  he  should 
be  removed.  But,  if  the  workman  is  thor- 
oughly competent  to  perform  his  tasks  and  is 
simply  the  victim  of  some  other  person's  blun- 
der, then  the  government  must  place  the  blun- 
der where  it  belongs. 

The  Promotion  of  Workmen: — All  labor 
seems  to  divide  itself  into  three  general 
classes.  The  total  product  is  the  combined 
product  of  many  workmen.  The  work  re- 
quired, becomes  part  of  a  system;  or,  the  sin- 
gle article  is  the  combined  efforts  of  many 
workmen.  The  work  of  the  different  corpora- 
tions practically  follows  along  these  lines. 

The  work  of  the  mining  companies,  practi- 
cally, follows  the  first  condition.  A  car  of 
coal  is  the  product  of  many  workmen.  The 
work  of  railroad  men,  practically,  follows  the 
second  condition.     Each  workman  becomes  a 

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Economics 

part  of  the  system.  The  work  of  the  steel 
companies,  practically,  follows  the  third  con- 
dition. A  bridge  or  steel  structure  is  the  com- 
bined efforts  of  many  workmen.  Each  work- 
man, or  class  of  workmen,  only  performed  a 
part. 

Observation  shows  that  the  work  of  the 
miner  is  largely  physical ;  the  work  of  the  rail- 
road man  is  largely  commercial;  that  is,  part 
physical  and  part  intellectual.  The  work  of 
the  steel  man  is  largely  intellectual.  Inferior 
work  at  any  point  may  render  the  whole  struc- 
ture useless. 

This  gives  another  method  of  classifying 
labor,  namely,  physical,  commercial  and  intel- 
lectual. This  classification  permits  labor  to  be 
divided  into  third  class,  second  class  and  first 
class.  In  addition,  there  are  skilled  mechanics, 
or  workmen  who  perform  the  entire  task  and 

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Economics 

produce  a  complete  article.  These  workmen 
might  be  termed  master  workmen.  This  ar- 
rangement would  give  four  classes  of  work- 
men; namely,  third  class  workmen;  second 
class  workmen ;  first  class  workmen ;  and  mas- 
ter workmen. 

Promotion  of  Officials. 

Three  methods  present  themselves  either  of 
which  may  be  used  in  promoting  officials. 
Each  method  produces  a  different  effect  upon 
the  official  or  operating  force.  These  meth- 
ods are: — the  line  organization;  the  staff  or- 
ganization ;  and  competitive  examinations.  In 
the  line  organization,  each  official  is  promoted 
according  to  his  position  in  the  organization. 
In  the  staff  organization,  men  are  chosen  to 
fill  certain  positions  irrespective  of  other  con- 
ditions. Both  of  these  methods  are  so  defec- 
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Economics 

tive  as  to  be  practically  useless.  In  the  line 
organization,  sooner  or  later,  some  one  will 
get  in  line  who  cannot  advance  or  will  not  ad- 
vance. The  result  is,  that  eventually  the  en- 
tire working  force  will  be  reduced  to  the  in- 
telligence of  the  one  who  will  not  advance. 
There  is  no  method  provided  to  get  past  him 
and  the  line  dare  not  be  broken. 

In  the  Staff  Organization,  it  immediately 
leads  to  disorganization.  The  whole  organi- 
zation becomes  suspicious  and  disloyal  for 
they  do  not  know  at  what  instant  someone 
will  be  advanced  over  them.  This  leaves  but 
one  practical  method,  that  of  competitive  ex- 
aminations. By  using  competitive  examina- 
tions the  entire  force  is  eligible  for  advance- 
ment. Working  standards  can  be  set  and 
maintained,  for  every  person  proved  that  he 
is  capable  of  performing  the  required  duties 

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Economics 

before  he  was  eligible  for  appointment.  In 
case  several  persons  become  eligible  for  the 
same  position  at  the  same  time,  it  might  be 
found  necessary  to  choose  one  of  the  number 
by  lot. 

Compensation  of  Workmen: — The  condi- 
tions of  rents,  taxes,  wages  and  cost  of  pro- 
duce, or  living  expenses,  are  so  related  that  to 
change  one  will  automatically  change  the 
other.  As  previously  explained,  it  is  the  work- 
ing of  the  peculiar  mathematical  condition 
where  the  quantities  vary  and  the  ratio  varies. 
This  condition  cannot  be  figured  satisfactorily 
by  using  the  ordinary  rules  of  arithmetic. 

Using  the  ordinary  rules  of  arithmetic,  high 
wages  and  high  cost  of  living  are  better  for 
the  wage  earner,  than  low  wages  and  low  cost 
of  living.  As  an  illustration — "A"  receives  a 
salary  of  Twenty- five  Dollars  per  week  and 

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Economics 

his  living  expenses  are  Twenty  Dollars  per 
week.  By  this  arrangement  he  saves  Five 
Dollars  per  week.  Double  his  salary  and  dou- 
ble his  living  expenses  and  he  saves  Ten  Dol- 
lars per  week.  Cut  his  salary  in  half  and  his 
living  expenses  in  half,  and  he  saves  but  Two 
Dollars  and  fifty  Cents  per  week. 

The  manufacturer,  or  employer  of  labor,  is 
compelled  to  operate  along  the  line  of  great- 
est profit.  The  higher  the  wages,  the  lower 
the  line  of  profit,  until  the  manufacturer 
reaches  the  point  where  it  is  more  profitable 
for  him  to  sell  the  raw  material  and  employ 
no  labor  for  manufacturing.  Hence,  high 
w|ages  tend  to  produce  goods  of  inferior  qual- 
ity. As  an  illustration,  "A"  is  a  manufacturer 
and  can  sell  an  article  for  ten  dollars.  By  do- 
ing an  additional  amount  of  work  the  value 
of  the  article  can  be  increased  to  fourteen  dol- 

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Economics 

lars.  But,  this  additional  work  costs  five  dol- 
lars. Hence,  it  is  more  profitable  for  "A"  to 
sell  his  article  for  ten  dollars  than  it  is  to  do 
the  extra  work  and  sell  the  article  for  four- 
teen dollars. 

As  previousy  explained,  the  workman  pro- 
duces wealth,  but  is  paid  in  capital.  Hence, 
the  workman  is  constantly  subjected  to  the 
fluctuations  in  the  value  of  capital  or  the 
change  in  prices. 

These  fluctuations  can  be  regelated  by 
means  of  a  constant  wage.  As  previously  ex- 
plained, an  able  bodied  man  working  on  a  plot 
of  ground  for  a  period  of  ten  hours,  and  de- 
voting his  energies  to  the  cultivation  of  wheat, 
will  produce  one  and  three-fourths  bushels. 
One  and  three-fourths  bushels  of  wheat,  or 
its  cash  equivalent,  then  becomes  our  stand- 
ard of  value  for  ten  hours  of  unskilled  labor. 

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Economics 

All  other  labor  can,  then,  be  regulated  in  terms 
of  unskilled  labor. 

The  freight  on  one  bushel  of  wheat  from 
the  northwestern  part  of  the  United  States  or 
the  southwestern  part  of  Canada  to  Liver- 
pool, England,  is  less  than  one  cent  per  bushel. 
Such  being  the  condition,  it  might  be  possible 
to  establish  a  uniform  rate  for  the  entire  coun- 
try. At  present,  we  lack  experimental  data, 
but  assuming  that  the  rate  is  uniform  for  the 
entire  country. 

Using  this  method,  it  will  be  necessary  for 
the  government  to  set,  or  establish  the  price 
of  wheat  at  certain  stated  periods.  If  it  is 
necessary  to  increase  the  price  of  wheat,  rents, 
taxes,  freight  rates,  wages  and  all  forms  of 
produce  increase  in  proportion  to  the  increase 
in  the  price  of  wheat.  If  it  is  necessary  to  de- 
crease the  price  of  wheat,  then  rents,  taxes, 

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Economics 

freight  rates,  wages  and  all  forms  of  produce 
decrease  in  proportion  to  the  price  of  wheat. 
That  is,  all  values  increase  or  decrease,  in 
equal  proportions.  The  only  permanent  con- 
dition being  that  ten  hours  of  unskilled  labor 
is  always  worth  one  and  three-fourths  bushels 
of  wheat  or  its  cash  equivalent. 

National  Employment  Bureaus: — In  some 
ages  of  the  world,  a  man  who  was  out  of  em- 
ployment, or  constantly  getting  out  of  employ- 
ment, was  considered  as  being  defective. 
Under  modern  conditions,  that  consideration 
is  no  longer  true.  In  all  lines  of  construction 
work,  first  class  men  may  get  out  of  employ- 
ment, at  any  time,  and  nearly  all  farmers  need 
additional  help  during  the  harvest  season.  The 
difficulty  seems  to  be  in  getting  the  right  man 
and  the  right  job  together. 

The  wheat  pit  acts  as  a  clearing  house  for 

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Economics 

the  fanner.  The  board  of  trade  acts  as  a 
clearing  house  for  the  manufacturer.  The 
stock  exchange  acts  as  a  clearing  house  for 
the  financier,  and  the  university  acts  as  a 
clearing  house  fbr  the  intellectual  man.  The 
working  man  has  no  clearing  house  for  his 
labor.  The  working  man  must  spend  valuable 
time  in  searching  for  employment;  and  the 
employer  of  labor  must  spend  valuable  time 
in  searching  for  help. 

An  economical  arrangement  to  solve  this 
difficulty  is  a  national  employment  bureau. 
This  would  act  as  a  clearing  house  for  labor. 

Several  conditions  arise  in  connection  with 
the  operation  of  a  national  employment  bu- 
reau. All  work  must  be  standardized,  and  it 
would  be  necessary  for  the  bureau  to  estab- 
lish and  maintain  its  own  system  of  standards. 
The  bureau,  being  responsible  to  both  the  em- 

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Economics 

ployer  and  the  employee,  must  be   familiar 
with  local  conditions. 

Environments  or  surroundings  will  con- 
stantly need  to  be  considered.  Not  only  must 
the  workman  be  capable  of  performing  the 
tasks  required  of  him,  but  he  must  also  be 
able  to  perform  the  tasks  required  of  him.  As 
an  illustration,  men  who  work  underground 
are  very  susceptible  to  climatic  changes.  In 
the  winter  time,  the  weather  is  too  cold,  and 
in  the  summer  time  the  weather  is  too  hot  for 
these  men  to  work  in  the  open  air.  Even 
though  they  know  how  to  perform  the  tasks 
required  of  them,  mill  men  and  office  men  are 
of  little  value  to  the  farmer,  during  harvest 
time.  They  are  unable  to  withstand  the  ef- 
fects of  the  sun.  Economically,  if  a  national 
employment  bureau  is  properly  conducted  it 
will  save  much  valuable  time  for  all  parties 

170 


Economics 

concerned.  In  order  not  to  be  a  burden  to  the 
tax  payers,  those  using  the  bureau  would  be 
charged  a  fee  sufficient  to  make  the  bureau 
self  sustaining. 


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Economics 


CHAPTER  XV. 
Insurance. 
As  previously  explained,  in  all  transactions 
there  is  a  certain  amount  of  risk  that  cannot 
be  avoided.  This  risk  has  been  eliminated,  to 
a  certain  extent,  by  means  of  insurance.  Lit- 
erally, insurance  is  helping  to  bear  each  others 
burdens.  The  farmer  must  continually  risk 
his  crops  against  storm,  drought,  and  frost. 
Annually  the  losses,  or  supposed  losses  from 
these  sources,  amount  to  hundreds  of  millions 
of  dollars.  So  regular  are  the  occur  ranees  and 
so  severe  the  losses,  that  no  method  has  ever 
been  evolved  to  compensate  the  farmer  for 
these  losses,  by  means  of  insurance.  In  the 
risk  of  storms,  drought  and  frost,  each  farmer 
bears  his  own  individual  loss. 
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Economics 

Calling  the  amount  paid  for  insurance  the 
rate,  in  the  case  of  storms,  drought,  or  frost, 
the  rate  would  necessarily  be  so  high  that  in- 
surance would  not  be  profitable.  Practically, 
insurance  has  narrowed  itself  into  three 
classes.  Fire  Insurance,  Accident  Insurance, 
and  Life  Insurance. 

In  fire  insurance,  different  methods  have 
been  evolved.  In  some  communities,  the  peo- 
ple band  together  for  mutual  protection.  In 
such  a  case  no  rates  are  charged,  but  in  case  of 
a  fire,  each  member  of  the  company,  is  as- 
sessed a  certain  amount.  Another  method  is 
to  form  stock  companies,  where  certain  rates 
are  paid  and  no  assessment  charges  are  made. 
In  cities  and  towns  where  paid  fire  companies 
are  maintained,  generally,  the  property  owners 
pay  two  rates  for  fire  protection.  They  pay 
one  rate,  to  the  insurance  company,  for  insur- 

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Economics 

ance,  and  they  pay  another  rate,  in  the  form 
of  tax,  to  support  the  fire  company. 

The  rate  of  insurance  will  vary  in  accord- 
ance with  the  material  of  which  a  building  is 
constructed;  the  location  of  the  building;  and 
the  use  of  the  building.  Usually  the  rate  of 
insurance  is  higher  for  buildings  constructed 
of  timber  than  it  is  for  buildings  constructed 
of  steel,  stone  or  brick.  The  rate  of  insurance 
will  be  higher  where  frame  buildings  are  built 
so  closely  together  that  a  fire  in  one  building 
may  be  communicated  to  other  buildings,  than 
it  would  be  if  each  building  were  isolated. 
In  regard  to  the  uses  of  buildings;  mills  and 
factories  usually  pay  a  higher  rate  of  insur- 
ance than  is  charged  for  dwellings. 

Accident  Insurance: — Accident  Insurance 
has  expanded  until  it  embraces  shipments  of 
goods,  either  by  railroad  or  ocean;  packages 

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Economics 

sent  by  mail;  as  well  as  injury  to  persons. 
Since  very  few  of  the  articles  insured  are  in- 
jured or  destroyed,  the  rate  of  insurance  can 
be  made  very  low.  Yet,  the  total  amount  col- 
lected must  be  sufficient  to  pay  all  damages  or 
injury. 

Life  Insurance: — Life  Insurance  is  an 
agreement  between  an  individual  and  a  corp- 
oration. The  individual  agrees  to  pay  the 
corporation  a  certain  sum  annually.  In  re- 
turn, for  this  payment,  the  corporation  agrees 
to  pay  a  certain  specified  sum,  to  some  person 
specified  in  the  agreement,  provided  the  person 
who  is  insured  dies  before  a  time  specified 
in  the  agreement. 

In  Life  Insurance  there  are  two  general 
methods  used.  One  method  is  to  pay  a  cer- 
tain sum  annually,  so  long  as  the  insured  per- 
son  lives.     The   other   method   is   to   pay   a 

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Economics 

certain  sum,  annually,  for  a  specified  number 
of  years.  At  the  end  of  which  time,  a  settle- 
ment is  made,  provided  the  person  insured 
does  not  die  in  the  meantime. 

In  case  the  person  insured  dies  before  the 
time  specified  in  the  agreement,  then  the  en- 
tire settlement  is  made  at  the  time  of  death. 

The  Advantage  and  Disadvantage  of  In- 
surance:— Insurance  is  always  a  sum  paid 
for  an  uncertainty.  Buildings  may  stand  un- 
til they  fall  from  decay,  and  be  insured  for 
the  entire  time.  On  the  other  hand,  buildings 
may  scarcely  be  completed  before  they  are 
destroyed  by  fire.  In  this  case,  the  insurance, 
on  the  buildings  that  have  stood  for  many 
years,  helps  to  pay  for  the  total  loss  on  the 
new  buildings.  Likewise,  in  the  transporta- 
tion of  freight,  the  insurance  on  freight  that 
arrives  safely  at  its  destination,  helps  to  pay 

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Economics 

for  freight  that  is  accidentally  lost  or  dam- 
aged. Accidents  to  persons  usually  render 
them  unfit  to  follow  their  usual  occupations, 
so  that  insurance  may  be  the  means  of  allevi- 
ating much  suffering. 

The  advantages  derived  from  life  insurance 
are  somewhat  different.  Primarily  the  ad- 
vantage of  life  insurance  is  to  meet  a  financial 
condition  where  if  everything  goes  right, 
everything  will  end  right.  But,  if  the  person 
interested  should  die  in  the  meantime,  inno- 
cent people  would  be  made  to  suffer.  That  is, 
by  insuring  their  lives,  students  may  safely 
borrow  money  to  complete  their  education; 
money  may  be  borrowed  for  business  pur- 
poses; or  marriage  relations  entered  into. 

The  foregoing  are  the  advantages  of  insur- 
ance, but  there  are  likewise  disadvantages  of 
insurance.      A   building  may   catch   fire   and 

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Economics 

burn  from  a  perfectly  natural  cause,  but  the 
owner  must  be  able  to  prove  clearly  what  this 
cause  was.  If  he  is  unable  to  do  so,  in  addi- 
tion to  forfeiting  his  insurance,  he  may  have 
to  stand  trial,  in  court,  on  either  of  two 
charges.  He  may  be  charged  with  setting  his 
building  on  fire,  or  he  may  be  charged  with 
criminal  negligence.  Either  is  a  penitentiary 
oflfence. 

In  the  case  of  freight  or  merchandise,  it 
may  be  charged  that  the  freight  was  insured 
for  more  than  it  was  worth  and  then  wilfully 
destroyed  in  order  to  obtain  the  insurance. 

Accident  insurance,  in  regard  to  humanity, 
divides  into  two  parts — persons  insuring 
themselves  and  workmen  insured  by  corpora- 
tions. A  person  may  insure  himself  against 
accident.  The  worst  charges  that  can  be 
brought  against  him  is  that  he  wilfully  injured 

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Economics 

himself  or  allowed  himself  to  become  injured.. 
When  corporations  insure  workmen,  a  differ- 
ent condition  arises.  Since  the  corporation 
pays  the  insurance  it  is  an  additional  amount 
added  to  the  cost  of  production;  hence  an 
added  burden  to  the  consumer.  Insurance 
may  likewise  breed  a  false  sense  of  security  in 
the  workmen  and  make  them  careless  or  negli- 
gent. 

In  life  insurance,  if  a  person  insures  his 
own  life  and  cause  of  death  cannot  be  clearly 
proven,  the  worst  charge  that  can  be  made 
against  him  is  suicide.  With  some  companies, 
a  charge  of  suicide  is  sufficient  to  invalidate 
the  insurance.  If  one  person  insures  another 
person's  life,  the  case  may  be  different.  As  an 
illustration,  a  parent  insures  a  child's  life  and 
the  child  dies  in  a  mysterious  manner  but  from 
perfectly  natural  causes.    While  the  parent  is 

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perfectly  innocent  of  any  crime,  the  parent 
may  be  compelled  to  stand  trial  for  murder. 
If  convicted,  the  parent  may  be  compelled  to 
pay  the  penalty  for  murder. 

We  see  that  a  person  who  is  dealing  with  in- 
surance needs  to  be  careful.  Then  the  disad- 
vantages of  insurance  may  be  avoided.  When 
insurance  is  properly  conducted,  the  advan- 
tages far  outweigh  the  disadvantages.  The 
many  who  are  not  injured,  help  to  compensate 
the  one  who  is  injured,  knowing  that  in  case 
of  injury  they  will  receive  like  compensation. 


m 


Economics 


CHAPTER  XVI. 
Scientific  Management. 

There  may  be  more  pathos  than  poetry  in 
the  old  song,  "Tomorrow  will  be  Friday  and 
we  caught  no  fish  today".  There  is  little  need 
for  management  in  the  humble  lives  of  the 
fisher  folks.  Yet,  no  fish  might  mean  no  food 
and  no  food  might  mean  starvation.  The 
fisher  folks  have  to  conform  their  lives  to  the 
elements  and  conditions  that  surround  them. 
There  is  little  chance  for  them  to  arrange  the 
elements  to  suit  their  lives. 

In  times  past,  men  forsook  the  humble  toil 
of  the  fisherman  and  engaged  in  other  forms 
of  occupation.  As  the  world  advanced,  what 
is  known  as  scientific  work  appeared  and  later 

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came  scientific  management.  Perhaps  the 
ancient  prophets,  when  they  foretold  the 
future,  were  simply  scientific  men  using  scien- 
tific methods.  Today  if  a  person  told  you  that 
in  our  Northern  clime,  it  would  be  hot  in  July 
and  cold  in  January  and  that  in  the  Southern 
hemisphere,  the  people  would  be  harvesting  on 
Christmas  and  going  sleighing  on  the  Fourth 
of  July,  we  would  not  call  him  a  prophet.  If 
we  called  him  other  than  well  informed,  we 
would  say  that  he  is  a  scientist. 

The  scientist  then  determines  conditions  and 
events  by  means  of  certain  laws.  Laws  always 
mean  order.  Hence,  Science  must  be  order 
and  scientific  management  must  be  orderly 
management.  So  long  as  each  person  worked 
by  themselves  and  for  themselves,  there  was 
little  need  for  management.  As  the  size  of 
the  task  and  the  number  of  people  required  to 

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perform  the  task  increased,  management  be- 
came an  important  factor.  When  machinery 
was  introduced,  management  became  the  ab- 
sorbing question. 

To  try  to  regulate  the  actions  of  workmen 
by  means  of  a  stop  watch  until  the  work- 
men fall  from  exhaustion  is  not  scientific 
management.  That  is  simply  brute  force 
worse  and  more  of  it.  Yet  science  can  be 
used  in  management  with  profitable  results. 
Beginning  with  mining  companies,  they  must 
accept  their  material  as  they  find  it.  There  is 
no  chance  for  any  kind  of  management  from 
that  source.  According  to  Biblical  traditions, 
the  ancients  found  trouble  when  they  at- 
tempted to  build  a  Tower  of  Babel  on  the 
Plains  of  Shinar.  Is  it  any  wonder  that  the 
moderns  find  trouble  when  they  attempt  to 
build  a  tower  of  Babel  under  the  ground? 

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Economics 

Everyone,  who  knows  anything  about  under- 
ground work,  knows  that  a  mine  is  a  trap. 
The  safety  of  one  person  rrlay  mean  the  safety 
of  all.  If  men  cannot  understand  each  other 
and  cannot  understand  the  orders  given  them, 
how  are  they  to  protect  their  own  lives  much 
less  the  lives  of  their  fellow  workmen?  Prob- 
ably the  first  step,  in  scientific  management  for 
underground  work,  would  be  a  uniform  lan- 
guage for  underground  workers.  This  would 
not  necessarily  mean  the  invention  of  a  new 
language.  Probably  a  law,  compelling  all 
workmen  entering  any  given  mine  to  be  able 
to  speak  and  understand  the  same  language, 
would  do  all  that  is  necessary. 

Since  the  invention  of  railroads  the  rail- 
roads have  been  struggling  with  a  scientific 
condition  that  still  causes  trouble.  The  manu- 
facturer, or  producer,  must  ship  his  goods  to 

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Economics 

the  receiver,  or  consumer,  wherever  that  per- 
son may  chance  to  live.  From  the  same 
source,  and  at  the  same  time,  a  railroad  may 
receive  freight  for  Northern,  Southern,  East- 
ern and  Western  points.  The  student  has 
learned  from  books  and  the  railroad  man  has 
learned  from  experience,  that  two  bodies  can- 
not occupy  the  same  space  at  the  same  time. 
Since  all  the  railroads  must  constantly  receive 
freight,  as  previously  stated,  the  question  that 
is  constantly  facing  the  railroad  man  is;  how 
to  arrange  that  freight  in  an  orderly  or  scien- 
tific manner.  The  railroads  have  tried  to 
solve  this  problem  by  using  the  hump  track  at 
the  receiving  yards.  The  hump  track  has  not 
proven  satisfactory.  In  the  first  place,  the 
hump  track  is  only  a  partial  solution  of  the 
difficulty.  In  the  second  place,  the  hump 
track  is  hard  on  rolling  stock.    The  difficulty 

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Economics 

can  be  met  satisfactorily  by  two  parallel  tracks 
connecting  at  frequent  intervals  with  cross- 
overs. These  tracks  should  be,  at  least,  long 
enough  to  accommodate  a  long  train.  In  oper- 
ation a  mixed  train  is  run  on  one  track  and  an 
engine  on  the  parallel  track  can  be  used  to 
pick  out  of  the  mixed  train  cars  that  are 
wanted.  In  this  manner  trains  can  be  arranged 
in  an  orderly  or  scientific  manner.  Thus  far 
we  have  seen  that  the  mining  man  has  no  choice 
in  the  matter,  and  the  railroad  man  is  con- 
fined to  such  close  limits  that  somehow  he 
must  solve  the  difficulties. 

Probably  scientific  management  yields  its 
largest  returns  to  the  manufacturer.  The 
manufacturer  always  works  in  the  Economic 
Law  of  Production  or  the  Economic  Law  of 
Increasing  Returns.  This  gives  him  a  greater 
chance  to  arrange  or  disarrange  the  elements 

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Economics 

that  enter  into  his  manufacturing  projects. 
Referring  to  our  previous  classification  of 
labor,  we  see  that  as  far  as  the  products  are 
concerned,  the  work  of  the  mining  man  is  en- 
tirely physical.  That  is,  he  must  take  the 
product  as  he  finds  it.  The  work  of  the  rail- 
road man  is  largely  physical  and  intellectual. 
In  intellectual  work,  the  operating  railroad 
man  is  confined  to  very  close  limits. 

The  work  of  the  manufacturer  not  only  em- 
braces physical  and  commercial  work,  but  it 
also  embraces  a  more  or  less  amount  of  intel- 
lectual work.  Very  often  the  results  of  all  his 
labor  depend  upon  the  intellectual  work.  Not 
being  able  to  have  this  intellectual  work  done, 
in  a  proper  manner,  often  places  the  manu- 
facturer in  a  very  embarrassing,  if  not  a 
serious  position. 

Different  conditions  of  labor  have  developed 

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Economics 

different  organs  of  the  body.  The  hunter  de- 
veloped the  eye  and  the  ear.  The  commercial 
man  developed  the  muscles  of  the  body. 
Scientific  work  and  inventions  have  developed 
the  brain.  In  order  to  reach  its  present  stage 
of  civilization,  the  world  has  developed  several 
classes  of  workers.  Not  only  do  we  have 
farmers,  mechanics,  skilled  and  unskilled 
labor,  but  as  previously  explained,  we  also 
have  professional  persons. 

The  manufacturer  and  contractor  must  not 
only  meet  physical  and  commercial  conditions, 
but  many  times  they  must  meet  intellectual 
conditions.  In  intellectual  work,  what  the 
manufacturer  and  contractor  want  are  facts. 
The  question  is — how  are  they  to  obtain  these 
facts?  Intellectual  work  can  only  be  meas- 
ured by  results  and  results  can  never  be  ob- 
tained until  the  work  is  completed.    If  a  man 

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Economics 

ruins  an  engine  for  a  contractor,  the  con- 
tractor knows  that  the  man  is  incompetent  to 
handle  the  engine,  but  that  does  not  repair 
the  engine.  If  a  man  designs  a  sewer  system 
for  a  town  and  it  will  not  work,  everyone  in 
town  may  know  it,  but  that  does  not  reim- 
burse the  injured  tax  payers. 

Many  of  these  conditions  can  be  traced  back 
to  our  school  system.  While  we  spend  mil- 
lions of  dollars  annually  in  educational  work, 
we  lack  a  national  educational  system.  Prac- 
tically each  teacher  uses  their  own  methods 
and  each  school  district  is  a  unit  by  itself.  The 
fundamental  principles  of  education  are  the 
same,  the  country  over,  yet,  we  lack  in  uni- 
form methods  of  instruction.  As  previously 
shown,  the  child  needs  to  be  instructed  physi- 
cally, commercially,  financially  and  intellect- 
ually.    In  some  cases  the  child  is  examined 

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Economics 

physically  by  a  physical  director  or  physician. 
The  remainder  of  our  educational  system  is 
simply  shooting  in  the  dark.  Children  are 
started  on  certain  lines  of  intellectual  work, 
but  no  examination  is  ever  made  to  determine 
whether  or  not  the  child  is  able  or  capable  of 
understanding  what  is  being  taught.  Nerv- 
ousness and  diseases  of  the  mind  abound,  yet 
no  examinations  are  made  with  a  view  to  as- 
sisting the  child  in  its  development. 

Experience  has  shown,  that  money  ex- 
pended for  educational  work  is  a  very  good  in- 
vestment. Experience  has  likewise  shown, 
that  seed  sown  in  the  soil  is  a  good  invest- 
ment ;  yet,  every  farmer  knows  that  before  the 
seed  is  sown,  the  soil  must  be  prepared.  If 
money  spent  for  educational  work  is  a  good 
investment  when  the  work  is  done  in  a  hap- 
hazard manner,  would  it  not  be  a  much  better 

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Economics 

investment  if  the  work  were  done  in  a  scien- 
tific manner? 

It  is  known,  that  skilled  physicians  can  read 
the  mind  with  as  much  precision  as  they  can 
read  the  muscles  of  the  body.  Such  being  the 
case,  is  it  not  a  good  investment  to  have  all 
school  children  examined  at  least  once  a  year 
by  a  competent  physician?  This  examination 
to  embrace  not  only  the  physical,  but  also  the 
commercial,  financial  and  intellectual  part  of 
the  child.  If  the  records  are  kept,  many  child- 
hood defects  could  be  detected  and  probably 
eradicated  before  the  child  reached  manhood 
or  womanhood.  In  professional  work,  this 
condition  opens  a  large  field  for  women.  A 
woman  can  understand  diseases  and  condi- 
tions peculiar  to  children  in  a  way  no  man 
understands  these  conditions. 

Among  sailors  and  sea- faring  people,  a  pilot 

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Economics 

is  a  person  who  guides  a  ship  through  a 
tortuous  channel.  A  wrecker  is  a  person  who 
takes  charge  of  a  ship  after  it  has  stuck  fast. 
In  their  professional  life,  lawyers  very  often 
must  arrange  their  work  to  suit  the  interests 
of  their  employer.  Very  often  the  services 
of  a  lawyer  are  not  required  until  his  em- 
ployer has  a  bad  legal  wreck  of  some  kind  on 
his  hands.  In  such  cases  do  conditions  per- 
mit the  lawyer  to  use  his  professional  talents 
in  their  highest  capacity?  If  the  employer 
will  permit,  is  not  the  lawyer  who  can  guide 
his  employers'  interests,  in  such  a  manner  as 
to  keep  them  out  of  the  meshes  of  the  law, 
performing  a  greater  service  than  the  lawyer, 
who  is  simply  called  upon  to  try  and  extract 
his  employers'  interests  from  legal  entangle- 
ments ? 

The  professor  has  his  students.     The  en- 

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Economics 

gineer  has  his  problems.  The  doctor  has  his 
patients,  and  the  lawyer  has  his  clients.  These 
men  are  all  chained  to  the  wheel  by  details  that 
they  dare  not  neglect.  Yet,  the  world  still 
needs  a  class  of  people  who  can  travel  for  a 
field  intellectually,  make  accurate  observations 
and  draw  correct  conclusions.  In  order  to 
accomplish  this  task,  the  person  must  have  a 
certain  amount  of  leisure  time.  With  the 
training  that  they  have  received,  the  ministers 
could  perform  this  work.  They  could  secure 
their  leisure  time  by  exchanging  pulpits  with 
each  other. 


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Economics 


CHAPTER  XVII. 
Panics,  Strikes  and  Wars. 

Panics: — It  has  been  quite  definitely 
proven  that  money  bears  about  the  same  re- 
lation to  industry  that  blood  bears  to  the  body 
or  that  sap  bears  to  the  plant.  Any  condition 
that  will  retard  or  stop  the  circulation  of 
blood  will  injure  or  destroy  the  body  and  any 
condition  that  will  retard  or  stop  the  flow  of 
sap  will  injure  or  destroy  the  plant.  In  the 
same  way,  any  condition  that  will  injure  or 
destroy  the  circulation  of  money  will  create 
a  panic. 

If  we  turn  to  nature  we  find  that  she  has 
three  ways  of  injuring  or  destroying  her 
products.    Nature  may  injure  or  destroy  her 

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products  either  by  storm,  by  drought  or  by 
frost.  In  the  case  of  storm  the  injury  is  sud- 
den and  may  be  so  great  as  to  destroy  the 
plant  or  so  slight  as  not  to  permanently  injure 
it.  In  the  case  of  drought,  the  process  is  long 
and  drawn  out.  If  the  plant  is  young,  a 
drought  of  short  duration  may  seriously  in- 
jure it,  while  if  the  plant  is  nearing  maturity 
a  severe  drought  of  long  duration  may  not 
seriously  injure  it.  The  case  of  frost  always 
denotes  the  point  of  transformation,  where 
growth  may  be  checked  or  stopped  entirely. 
In  the  case  of  young  plants,  a  very  light  frost 
may  create  serious  damage  while  plants  that 
have  reached  maturity  may  stand  a  severe 
freeze  without  injury. 

As  the  industries  follow  the  laws  of  growth, 
conditions  affect  the  industries  as  much  as 
storms,  drought  and  frost  affect  the  plants. 

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Economics 

The  conditions  may  only  affect  a  single  indus- 
try ;  they  may  affect  a  group  of  industries ;  or 
they  may  affect  all  the  industries.  Single  in- 
dustries will  all  submit  to  this  general  classifi- 
cation; the  construction;  the  operation;  and 
the  returns.  Sudden  inventions  or  discoveries 
very  often  affect  the  industrial  world  like 
rainbows  in  the  heavens.  Industrial  plants 
are  located,  apparently,  so  as  to  try  to  capture 
the  pot  of  gold,  at  the  end  of  the  rainbow.  If 
the  article,  to  be  manufactured,  is  some  house- 
hold or  personal  affair,  the  plant  may  operate 
successfully  until  the  market  or  demand  for 
the  product  is  supplied  and  then  as  there  is 
no  market,  or  demand,  for  the  product,  the 
plant  becomes  idle  and  in  many  cases  value- 
less. Hence,  one  of  the  causes  of  panics  is 
destruction  of  markets.  In  single  plants  there 
are  a  number  of  conditions  that  often  times 

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Economics 

create  difficulty,  but  since  they  only  affect  a 
single  plant  they  could  scarcely  be  termed 
panics.  Fires,  floods  or  storms  may  prove  ex- 
pensive, but  logically  they  would  be  accidents 
and  could  scarcely  be  termed  as  panics. 

Groups  of  industries  sometimes  occur  with 
a  leading  industry  upon  which  the  others  de- 
pend. Very  often  this  leading  industry  is  a 
railroad  that  has  been  built  into  a  new  terri- 
tory. Industries  spring  up  along  the  railroad, 
but  there  is  not  sufficient  traffic  to  support  the 
railroad.  Consequently  the  railroad  goes 
down  and  drags  the  other  industries  down 
with  it.  Hence,  another  cause  of  panics  is 
over-investment. 

If  all  industries  are  affected,  the  panic  be- 
comes general  and  must  be  caused  by  some 
general  condition.  In  that  case  the  condition 
causing  the  panic  must  be  either  a  created  or 

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Economics 

a  natural  one.  The  condition  causing  the 
panic  may  be  adverse  or  severe  legislation 
causing  a  distrust  in  the  government.  Or  a 
general  panic  may  be  caused  by  natural  causes. 
If  for  any  reason,  large  bodies  of  men  are  so 
employed  that  they  are  not  producing,  sooner 
or  later  all  the  money  will  accumulate  in  the 
hands  of  those  who  are  producing.  Usually, 
this  class  of  producers  are  the  farmers.  Na- 
turally, a  panic  will  ensue  until  conditions 
again  adjust  themselves^  on  a  more  balanced 
basis. 

Panics  may  be  slight  or  severe,  depending 
upon  the  conditions  that  cause  them.  If  the 
panic  only  afifects  a  single  plant  or  industry 
that  has  no  market,  the  plant  may  be  so  ar- 
ranged that  a  new  product  can  be  produced, 
for  which  there  is  a  market.  In  that  case  the 
panic  will  soon  disappear. 
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Economics 

A  railroad,  opening  up  a  new  territory,  of- 
fers inducements  for  people  to  settle  in  that 
territory.  As  the  population  increases  the 
amount  of  traffic  for  the  railroad  increases 
and  other  business  can  increase  in  proportion, 
thus  causing  the  panic  to  disappear. 

A  severe  panic  of  short  duration  may  be 
caused  by  adverse  legislation;  usually  when 
the  legislation  is  adjusted  the  panic  disap- 
pears. The  severest  of  all  panics  are  those 
created  by  natural  causes.  When  natural 
causes  are  involved,  conditions  have  to  read-' 
just  themselves. 

Very  often  this  readjustment  has  to  take 
place  along  entirely  new  lines  and  may  cause 
widespread  and  serious  disaster  for  a  long 
period  of  time. 

Strikes: — A  strike  is  a  severing  of  work- 
ing relations  between  a  corporation  and  its  em- 

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Economics 

ployees.  The  cause  of  strikes  is  a  sociological 
and  not  an  economic  condition.  About  the 
only  economic  condition,  that  needs  to  be  con- 
sidered in  regard  to  strikes  is: —  during  a 
strike,  who  are  the  losers  ?  As  an  illustration, 
we  will  use  a  street  car  strike.  There  are 
three  elements  that  need  to  be  considered. 
The  traveling  public,  the  operating  company, 
and  the  employees.  Under  normal  conditions 
these  three  elements  combine  and  the  public 
has  service,  the  company  has  an  income  and 
the  employees  have  work  or  labor. 

During  a  strike  these  three  elements  separ- 
ate into  three  separate  units  or  conditions. 
The  traveling  public  is  one  unit  or  condition; 
the  operating  company  is  another  unit  or  con- 
dition ;  while  the  employees  form  a  third  unit 
or  condition.  During  a  strike,  the  traveling 
public  is  subjected  to  inconveniences  and  these 

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Economics 

inconveniences  are  expensive.  But,  to  com- 
pensate for  this  loss,  there  is  a  daily  saving  of 
the  entire  street  car  fare.  That  is,  if  the  street 
cars  do  not  run  the  public  have  no  chance  to 
ride  on  the  street  cars  and  do  not  need  to 
pay  street  car  fare.  Hence,  with  the  public, 
the  gains  and  losses  are  about  equal. 

The  operating  company  loses  its  income, 
but  it  saves  its  operating  expenses.  That  is, 
when  the  employees  are  on  strike  they  receive 
no  pay;  but,  the  equipment  of  the  company  is' 
lying  idle.  Hence,  barring  violence  or  de- 
struction of  property,  about  all  the  company 
loses,  during  a  strike,  is  the  interest  on  the 
cost  of  its  equipment. 

The  employees  are  dealing  with  the  element 
of  time,  and  the  wheels  of  time  move  forward 
but  never  backward.  Hence,  time  once  lost 
can  never  be  recovered.     If  by  striking,  the 

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Economics 

employees  gain  an  increase  in  pay,  eventually 
they  may  regain  their  losses.  As  an  illustra- 
tion, the  employees  are  receiving  two  dollars 
per  day  and  by  striking  their  pay  is  increased 
to  two  dollars  and  ten  cents  per  day.  Then 
the  employees  must  regain  their  lost  time  at 
the  rate  of  ten  cents  per  day.  That  is,  if  the 
employees  had  continued  at  work,  every  day 
they  would  have  received  two  dollars.  During 
the  days  they  strike,  they  receive  no  pay  ex- 
cept the  increase  in  pay  at  the  end  of  the 
strike.  Hence,  the  strikers  pay,  per  day,  is 
the  increase  in  the  daily  wage  divided  into  the 
former  daily  wage.  In  the  conditions  stated, 
for  every  day  the  employee  strikes  he  must 
work  twenty  days  to  recover  his  losses.  If  he 
receives  no  increase  in  pay  his  losses  are  per- 
manent. 

In  character,  all  strikes  are  similar  to  the 

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illustration  given.  In  the  case  of  mines  or 
fuel  supplies,  some  distant  city  or  steamship 
company  may  be  the  purchaser.  If  the  mine 
is  the  main  industry  in  the  community,  since 
the  mine  is  deprived  of  its  income  all  business 
in  the  community  must  suffer.  Since  a  strike 
deals  directly  with  the  finances  of  a  commun- 
ity, a  strike  of  long  duration  will  always  dis- 
arrange business  conditions. 

Wars: — War  is  a  condition  from  which 
the  inhabitants  of  the  earth  have  never  yet 
been  able  to  escape.  With  the  savage,  war 
was  a  constant  condition.  The  true  savage 
obtained  his  food  from  such  stores  as  nature 
provided.  To  deprive  him  of  food  was  to  de- 
prive him  of  life.  Hence,  each  savage  was  the 
natural  enemy  of  every  other  savage.  With 
the  savage,  war  had  but  one  serious  stage, 
that  was  during  its  existence.     If  any  prep- 

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Economics 

aration  was  made  the  preparation  was  made 
in  an  instant.  The  savage  knew  nothing  of 
repairing  the  damage  done  by  war  or  a  recon- 
struction period.  Might  was  right,  that  was 
the  law  and  government  of  the  savage.  The 
savage  was  a  child  of  nature,  he  knew  no 
sense  of  ownership  consequently  he  knew  no 
theft. 

The  semi-civilized  man,  when  he  domesti- 
cated the  animals,  not  only  increased  the 
causes  of  war  but  he  also  increased  the  effect 
of  war.  While  the  savage  knew  no  sense  of 
ownership,  the  semi-civilized  man  established 
a  sense  of  ownership,  consequently  he  knew 
the  meaning  of  theft.  One  of  the  principal 
causes  of  war,  among  semi-civilized  people, 
was  the  stealing  of  each  others  herds.  War, 
now  had  two  serious  conditions.  First,  the 
disasters  or  calamities  that  might  happen  while 

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Economics 

the  war  lasted;  second,  the  reconstruction  pe- 
riod. War  would  scatter  his  flocks  and  herds 
but  if  successful,  in  war,  he  might  again  be 
able  to  regain  his  flocks  and  herds.  If  unsuc- 
cessful in  war,  he  was  compelled  to  gain  other 
flocks  and  herds,  seek  other  means  of  obtain- 
ing a  livelihood,  or  perish. 

When  man  established  a  government  to  pro- 
tect  and  regulate  affairs,  the  causes  for  war 
were  greatly  increased  and  the  effect  of  war 
was  again  increased. 

To  the  civilized  man,  war  has  three  serious 
periods  or  stages.  The  period  preceding  the 
war ;  the  period  during  the  war  and  the  period 
following  the  war,  or  the  reconstruction  pe- 
riod. History  shows  that  generally,  the  causes 
of  war  are  long  standing  and  eventually  war 
ensues. 

Actual  war  develops  several  conditions  that 

205 


Economics 

need  to  be  considered.  First,  is  the  actual 
loss  of  property  and  human  life.  While  that 
loss  is  serious,  logically,  it  seems  to  fall  more 
heavily  upon  the  conditions  that  existed  pre- 
vious to  the  war  and  tends  more  thoroughly 
to  blot  out  those  conditions.  Another  condi- 
tion that  war  implies  is  the  changed  relations 
of  the  working  forces.  Armies  are  consumers 
but  not  producers.  Another  condition  pro- 
duced by  war  is  the  shifting  of  the  financial 
relations.  Wars  always  have  necessitated  the 
borrowing  of  large  sums  of  money.  At  the 
end  of  the  war,  generally,  this  money  is  all 
in  the  hands  of  the  producers  and  the  prin- 
ciple producers,  during  every  war,  are  the 
farmers. 

The  war  being  over,  the  next  step  is  the 
reconstruction  period.  The  first  step,  in  the 
reconstruction    period,    is    to   throw    all    the 

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Economics 

larmies  out  of  employment.  The  discharging 
of  the  armies,  likewise  destroys  the  markets 
that  were  used  to  supply  these  armies.  The 
destruction  of  markets  entails  a  stagnation  in 
financial  affairs  and  stagnations,  in  financial 
affairs,  are  the  cause  of  panics.  Hence,  it 
follows,  as  a  logical  conclusion,  that  the  first 
thing,  to  be  expected,  after  the  end  of  a  war, 
is  a  panic.  Another  condition,  to  be  ex- 
pected, is  the  repudiation  of  debts.  A  con- 
quered or  defeated  nation  bears  about  the 
same  relation  to  nations  that  a  dead 
person  bears  to  society.  When  a  man  dies  and 
leaves  debts,  if  he  leaves  sufficient  property, 
the  debts  are  paid.  If  he  leaves  no  property 
there  is  nothing  with  which  to  pay  the  debts. 
The  same  conditions  seem  to  exist  between 
nations.  When  a  nation  passes  out  of  exist- 
ence, generally,  there  is  nothing  left  with 
which  to  pay  its  debts. 

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Economics 

Another  condition,  that  the  Reconstruction 
Period  develops,  is  the  changed  relations  that 
the  war  causes  between  the  working  forces. 
During  the  Forties  and  Fifties,  the  Southern 
Planters,  undoubtedly,  would  have  laughed 
you  to  scorn,  if  you  had  told  them  that  pine 
trees  would  yet  grow  in  their  cotton  fields. 
Under  the  condition  of  Slavery,  as  it  existed 
in  the  Southern  part  of  the  United  States  pre- 
vious to  1860,  the  country  could  produce  vast- 
ly more  than  it  could  consume.  The  general 
condition  of  labor  being  that  the  slave  per- 
formed the  physical  part  of  the  labor  and  the 
master  performed  the  intellectual  part  of  the 
labor.  When  war  severed  this  relation  of 
labor  and  the  master  and  the  slave  each  man- 
aged his  own  affairs,  the  production  of  the 
country  diminished.  The  slave,  unassisted  by 
the  intelligence  of  the  master,  was  not  intel- 
ligent enough  to  manage  the  plantations  and 

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Economics 

the  master,  without  the  assistance  of  the  slave, 
was  not,  physically,  strong  enough  to  perform 
the  labor  required. 

Observation  shows  that  wars  may  be  the 
gasps  of  a  dying  nation  or  they  may  be  the 
pangs  of  birth  of  a  new  nation.  History 
shows  that  when  nations  are  born  they  bear 
much  the  same  relation  to  nations  that  an  in- 
fant bears  to  humanity.  They  may  become 
strong  and  powerful,  but  it  takes  time  to  de- 
velop them.  A  mill  cannot  be  run  with  the 
water  that  is  passed,  neither  can  a  nation  be 
rebuilt  with  the  property  and  lives  destroyed 
during  a  war.  In  the  Reconstruction  Period, 
new  forces  must  be  set  to  work,  new  material 
acquired.  Very  often  these  new  forces  and 
new  materials  must  grow  from  old  conditions, 
so  that  in  Reconstruction  we  may  expect  a 
slow  tedious  process. 

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Economics 


CHAPTER  XVIII. 
Conclusion. 

The  workings  of  civilized  man  have  set  in 
motion  the  laws  of  nature.  In  our  study  we 
have  seen  that  the  laws  of  nature  may  cross 
each  other ;  branch  like  branches  of  a  river,  or 
play  hide  and  seek  with  each  other.  They 
may  advance  and  recede  like  the  waves  of  the 
ocean.  They  may  glitter  and  sparkle  like  the 
rainbow  or  they  may  advance  with  the  force 
and  fury  of  the  thunder  cloud.  In  her  deal- 
ings with  man,  nature  may  be  as  kind  and  as 
invigorating  as  the  sunshine ;  as  soft  and  gen- 
tle as  the  Spring  rain ;  or  as  fierce  and  savage 
as  the  lightning  that  darts  from  the  thunder 
cloud. 


Economics 

In  the  law  of  Decreasing  Returns  or  the 
Law  of  Material,  the  earth  not  only  g^ves  man 
of  the  fish  which  swim  in  the  water;  of  the 
birds  which  fly  through  the  air;  of  the  beasts 
which  roam  over  the  plains;  of  the  forests 
that  clothe  the  mountains ;  and  of  the  fertility 
of  the  soil;  but  she  allows  man  to  tear  great 
gaps  in  her  side  and  gives  him  of  the  miner- 
als, that  she  hides  in  her  bosom.  In  the  Law 
of  Constant  Returns,  or  the  Law  of  Trans- 
formation, nature  will  transform  the  energies 
of  man  into  engines  that  fly  through  the  air; 
ships  that  plough  the  seas ;  trains  that  run  over 
the  land;  cities  that  stand  on  the  earth;  or 
bending  orchards  and  fields  of  grain  that  dot 
the  landscape.  In  the  Law  of  Material,  man 
must  accept  what  nature  gives,  but  nature  will 
give  until  her  supplies  are  exhausted.  In  the 
Law  of  Transformation,  nature  will  give  man 

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Economics 

what  he  wants,  provided  man  pays  nature's 
bill.  Nature  will  transform  man's  energy  into 
food  for  his  table;  clothing  for  his  person; 
a  home  for  his  dear  ones;  vehicles  for  pleas- 
ure ;  or  implements  of  destruction,  to  be  used 
in  destroying  his  fellow  man. 

When  it  comes  to  the  Economic  Law  of  In- 
creasing Returns,  or  the  Economic  Law  of 
Production,  nature  demands  her  pound  of 
flesh  to  the  last  ounce.  When  her  bill  is  due, 
it  matters  not  to  nature,  whether  it  takes  man 
a  day  or  a  century  in  which  to  pay  it.  It  mat- 
ers not  to  nature,  whether  the  bill  must  be 
paid  by  unborn  generations,  by  the  babe  who 
sleeps  in  the  cradle;  by  the  man  in  the  prime 
of  life ;  or  by  the  gray  haired  sire  who  is  tot- 
tering on  the  verge  of  the  grave.  In  the  Eco- 
nomic Law  of  Increasing  Returns,  whenever 
nature's  bill  is  due,  pay  man  must  and  pay  he 

will. 

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Economics 

What  toll  nature  will  exact  from  humanity 
for  the  warlike  conditions  that  exist  today, 
only  future  generations  will  know. 

The  End. 


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